Financial Times

October 24, 2012 4:37 pm

By Shahien Nasiripour in Washington

In July, when Edward DeMarco refused to implement a debt-reduction scheme championed by the White House, Tim Geithner, US Treasury secretary, accused him of making a decision that ran contrary to the best interests of the nation.

It was one of a number of decisions taken by the Washington career bureaucrat which have stymied the Obama administration’s most aggressive efforts to boost the US property market, by blocking refinancings and forgiveness of troubled borrowers’ mortgages.

But if Mr Obama wins re-election, Mr DeMarco’s days may be numbered, with senior White House officials quietly telling housing industry activists in recent weeks that he will be replaced.

Mr DeMarco oversees state-controlled mortgage financiers Fannie Mae and Freddie Mac, the twin housing groups that control more than half of all outstanding US home loans.

He temporarily was named acting director of the Federal Housing Finance Agency in August 2009 by Barack Obama, US president, after the previous director left for the private sector.

He is still there three years later, despite clashes with the White House and the Treasury department over various administration proposals to aid the housing market.

In 2010, Senate Republicans opposed Mr Obama’s choice to replace Mr DeMarco and have since said they would be unwilling to support other candidates who support principal reduction schemes. Administration officials have argued there are few qualified candidates willing to take the demanding position.

Some borrower advocates have argued that the White House has kept Mr DeMarco in office in part because it provides the administration with an easy excuse when questioned about why they have not done more to prevent millions of home seizures.

But in the past few weeks, Obama administration officials – including Gene Sperling, director of Mr Obama’s national economic council, and Jon Carson, director of the White House’s office of public engagement – have told Democratic groups that they hope to oust Mr DeMarco in the coming months, most likely by replacing him via an appointment while Congress is not in session, according to people familiar with the matter.

Administration officials have asked housing groups to supply a list of potential candidates. Officials made their statements most recently on September 13 during a White House housing summit.

The White House is weighing how and when to make a so-called “recess” appointment, which would bypass the congressional approval that is traditionally sought for presidential nominees.

For example, after it was clear that Republican lawmakers would not support the confirmation of Richard Cordray to lead the Consumer Financial Protection Bureau, Mr Obama chose to install him in the post using a recess appointment.

The White House and the FHFA declined to comment. Mr DeMarco also declined to comment.
Mr DeMarco sets policies and approves strategic business decisions for companies whose market share allows him to influence everything from what kinds of loans are made to how companies deal with troubled borrowers who fall behind on their payments.

Obama administration officials and their allies in the housing industry have criticised Mr DeMarco for his alleged obstinacy, which they argue has impeded their efforts to spur a more immediate and powerful housing recovery.

Mark Seifert, executive director of Empowering and Strengthening Ohio’s People, a foreclosure prevention counselling group, described Mr DeMarco as an enemy of borrowers.

Last year, the agency revamped a programme that has boosted refinancings. But it declined to implement other suggested policies that may have enabled greater numbers of homeowners to refinance their mortgages.

Mr DeMarco is mandated by law to “preserve and conserve” the housing groups’ assets, which has been translated into minimising losses on behalf of taxpayers.

The US government rescued Fannie Mae and Freddie Mac in September 2008 after rising loan defaults led it to the brink of collapse. Since then they have cost taxpayers more than $140bn.
Since April 1, 2009, the two housing groups have enabled nearly 13m home mortgages to be refinanced, according to the FHFA. They have modified 1.2m mortgages since the fourth quarter of 2008.

Though at times critical of his stewardship of Fannie Mae and Freddie Mac, Republicans have generally praised Mr DeMarco for his positions that have at times conflicted with White House aims.

Republicans have claimed that the Obama administration prefers to use the housing groups to advance more relief for homeowners at the expense of taxpayers who will foot the bill.
Democrats, including White House and Treasury officials, have argued that a more robust housing recovery would ultimately reduce taxpayer losses associated with supporting Fannie Mae and Freddie Mac.