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Edward J. DeMarco

Acting Director of the Federal Housing Finance Agency

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(Federal Housing Finance Agency)

Why He Matters

In the wake of the 2008-2009 economic crisis, DeMarco made aggressive moves in his interim role as head of the Federal Housing Finance Agency (FHFA) to deal with the reeling mortgage giants Fannie Mae and Freddie Mac and to protect taxpayers' interests.

To start, DeMarco set the agenda for the Home Affordable Refinance Program, meant to reduce the monthly mortgage payments from distressed homeowners as a result of the suprime mortgage crisis (Freddie Mac and Fannie Mae are implementing this program). For his role, DeMarco was named one of the 50 most powerful people in real estate by Bloomberg Businessweek.

Also, under DeMarco's watch, the FHFA subpoenaed 64 issuers and servicers of mortgage-backed securities in July 2010 to see if they misled Fannie and Freddie when they sold privately-issued mortgage bonds.

The FHFA also controversially blocked the White House's idea to implement home-energy improvements when it told the firms not to participate.The program would support loans to make environmental improvements, to which the FHFA took exception because those loans could potentially take precedent over a first mortgage.The move resulted in several lawsuits by states already implementing the program.

DeMarco was only the second person to head the FHFA, as it was created in July 2008, when then President George W. Bush signed the Housing and Economic Recovery Act. The ct combined the Office of Federal Housing Enterprise Oversight, the Federal Housing Finance Board and a small group of staff from the Department of Housing and Urban Development.

FHFA is responsible for overseeing all the housing-related government-sponsored entities, including Freddie Mac, Fannie Mae, and the 12 Federal Home Loan Banks, which serve as major sources of funding for hundreds of banks.

President Obama chose North Carolina Banking Commissioner Joseph Smith to be DeMarco's successor Nov. 13, 2010, but DeMarco is still expected to play a key role in the agency.

In His Own Words

"Irrespective of what roles we ask the government to play in housing finance, we should not repeat a structure where public mission and private motive are commingled, as was the case at Fannie Mae and Freddie Mac." - Edward DeMaro.

More on: Edward J. DeMarco

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At a Glance

  • Career History: Office of Federal Housing Enterprise Oversight, COO, Deputy Director (October 2006-August 2009); Social Security Administration, Assistant Deputy Commissioner for Policy (2003-2006) Director, Office of Financial Institutions Policy, U.S. Department of the Treasury (1993-2003); U.S. General Accounting Office (1986-1993)
  • Alma Mater: University of Maryland, Ph.D. in Economics; University of Notre Dame, B.A. in Economics.
  • DC Office: 202.414.6923
 

Path To Power

DeMarco, a lifetime bureacrat, has led FHFA since his predecessor James Lockhart left the agency in September 2009. Lockhart got a job with private equity investment firm WL Ross & Co. before Obama appointed a successor. DeMarco previously worked with Lockhart as assistant deputy commissioner at the Social Security Administration (SSA).

DeMarco became part of the FHFA through one of the predecessor agencies, the Office of Federal Housing Enterprise Oversight, which he joined in October 2006 as its chief operating officer and deputy director. Before that he worked at the SSA dealing with policy, research, and statistics.

Prior to his stint at the SSA, he was with the U.S. Department of Treasury for ten years. His last position with the Treasury was as director of the Office of Financial Institutions Policy conducting analysis of public policy issues involving the government-sponsored enterprises and other financial institutions.

Leading up to that, he spent seven years at the U.S. General Accounting Office.

 

The Issues

In September 2008, the government took Fannie Mae and Freddie Mac into conservatorship, legal control meant to save the nearly-imploded government-sponsored entities (GSEs). As of the start of 2011, they would both have ceased to function without the rescue and the continuing support of the Treasury.

DeMarco led a loan modification program in order to mitigate Fannie and Freddie's losses, while not getting involved in any new product lines while the GSEs remained in conservatorship. During the 12 months ending June 30, 2010, Fannie and Freddie permanently modified more than 400,000 mortgages.

The government thinks that banks should share the burden of the Fannie and Freddie bailout, which had cost taxpayers $148 billion through September 2010. DeMarco believes that by forcing repurchases of mortgages whose quality failed to meet sellers' representations, Freddie and Fannie can limit their U.S. aid. As part of that effort, in July the FHFA issued 64 subpoenas to see if the banks have a legal responsibility for some of Fannie and Freddie's losses on private-label mortgage-backed securities. D

Federal Home Loan Banks

Regardling the 12 Federal Home Loan Banks, DeMarco came down hard on them, scolding them for straying from the public-policy path. He warned them to take fewer financial risks, signaling the FHFA's plans to slash taxpayer costs. Community banks were very concerned by efforts to restrict the home-loan banks' role, according to a Wall Street Journal report.

With tighter constraints, Federal Home Loan Bank assets have been on a decline since September 2008 and stood at $937 billion as of September 2010.

Foreclosure Moratorium

In October 2010, Bank of America halted its foreclosure sales, citing worries about documentation. Ally Financial's GMAC Mortgage and JPMorgan Chase & Co. also suspended some or all of their foreclosure activity.

DeMarco didn't support a blanket moratorium on foreclosures, he said, because the cost to taxpayers outweighed the benefits. Still, the problem looms large, as through November 2010, Fannie and Freddie owned or guaranteed 30 million home mortgages, of which more than 1.3 million were more than 90 days seriously delinquent. Foreclosure processes usually begin four months after the properties become seriously delinquent. Alternatives to foreclosure can reduce losses and benefit neighborhoods by adding stability to local housing markets. But if they don't work, swift foreclosure is best, DeMarco said in congressional testimony.

The FHFA is reviewing the practices used in enforcing the contracts and encouraging any alternative to foreclosure. In October 2010, the FHFA released guidelines on how to carry out foreclosures. It recommended processes and procedures and verified that all documents, including affidavits and verifications, are completed in compliance with legal requirements. The policy framework also provided the servicers with guidance on how to swiftly respond to errors and how to proceed before evictions are implemented.

The guidance came amid increased public outrage, accusing mortgage servicers of mismanaging foreclosure documents and possibly violating foreclosure laws.

There were an estimated 2.82 million homes entering foreclosure during 2009, up from 2.28 million foreclosures in 2008.

 

The Network

DeMarco started at the FHFA under James Lockhart, with whom he als previously worked as assistant deputy commissioner at the Social Security Administration. While heading the FHFA, DeMarco's deputy director for enterprise regulation was Chris Dickerson. The acting deputy director for housing mission and goals was Wanda DeLeo and the general counsel was Alfred Pollard.

 

Campaign Contributions

DeMarco has made no campaign contributions, according to OpenSecrets.org, which tracks individual campaign contributors to federal candidates, parties and political action committees.

 

Additional Resources

  1. Hagerty, James, Wall Street Journal, "
  2. DeMarco, Edward,
  3. Philyaw, Jason, HousingWire, "FHFA Faces Another Lawsuit Over PACE Program," Oct. 17, 2010.
  4. FHFA, Statement, July 14, 2010.
  5. DeMarco, Edward, FHFA, Testimony, Sept. 15, 2010.
  6. FHFA, Meet the Director
  7. Demarco, Edward, Speech at Loss Mitigation Conference in Texas, July 21, 2010.
  8. Shenn, Jody and Woeller, Lorraine, Bloomberg, "Replacing Fannie Overseer May Limit Loan Putbacks,: Rosner Says," Nov. 12, 2010.
  9. DeMarco, Edward, FHFA, Testimony, Nov. 17, 2010.
  10. BofA Halts All Foreclosure Sales
  11. Hughes, Darrell, Dow Jones Newswires, "
  12. , Nov. 17, 2010.
  13. FHFA, Statement, October 2010.
  14. England, Robert Stowe, Mortgage Banking "Q&A with Edward DeMarco," May 2010.
  15. ," Oct. 9, 2010.
  16. Zibel, Alan, AP, "Gov't say banks should share Fannie, Freddie Costs," Sept. 15, 2010.
  17. DeMarco, Edward, FHFA,
  18. Timiraos, Nick and Solomon, Deborah, Wall Street Journal, "Mortgage Regulator Is Tapped," Nov. 13, 2010.
  19. Frumes, Max, The Deal, "Mortgage Maven," Oct. 15, 2010.
  20. Timiraos, Nick and Solomon, Deborah, Wall Street Journal, "Mortgage Regulator Is Tapped," Nov. 13, 2010.
  21. , Sept. 15, 2010.
  22. ," Oct. 13, 2010.
  23. FHFA, Meet the Director
  24. Federal Deposit Insurance Corp. report, citing Mortgage Bankers Assocation statistics.
  25. FHFA web site
  26. ," May 3, 2010.
  27. Testimony
  28. Wong, Venessa, Bloomberg Businessweek, "The 50 Most Powerful People in Real Estate 2010," Oct. 3, 2010.
  29. Home Truths for Home Loan Banks
  30. DeMarco, Edward, FHFA, Testimony,Sept. 15, 2010.
  31. US Housing Agency Issues Guidance On Mishandled Foreclosure Files
  32. eMarco, Edward, FHFA, Testimony, Sept. 15, 2010.
  33. Dan Fitzpatrick, Damian Paletta and Robin Sidel, Wall Street Journal, "