Obama taps N.C. banking regulator to lead Federal Housing Finance Agency
Friday, November 12, 2010; 11:35 PM
President Obama on Friday tapped a state banking regulator who took a hard stand against questionable lending practices to run the agency that oversees Fannie Mae and Freddie Mac, the two mortgage finance giants that might be overhauled next year.
As director of the Federal Housing Finance Agency, Joseph A. Smith Jr., the current North Carolina commissioner of banks, would wield great power in the nation's mortgage market.
The FHFA runs Fannie and Freddie, government-owned companies responsible for funding more than half of all home loans made by banks. As a result, they have few rivals in shaping the mortgage market, where rates on home loans have been at historic lows for months, keeping the struggling housing market alive.
Whether they will continue to play that role is up in the air. Since they were seized by the government, Fannie and Freddie have received about $150 billion in taxpayer aid to offset losses on defaulted mortgage loans.
The Obama administration plans to release a plan to overhaul the companies in January. But with the Republican's capture of the House, it is difficult to know whether any proposed overhaul will gain support in Congress.
Smith would replace Edward DeMarco, the acting FHFA director, who has overseen the agency since last year. Smith's nomination is subject to Senate approval.
"Mr. Smith brings to this position both tremendous expertise and a deep commitment to strengthening our housing finance system for the American people," Obama said in a statement.
Smith has overseen North Carolina's banks since June 2002. He took an early stand against lending practices that steered minorities and low-income people into loans they could not afford. He also was credited with overseeing an effective program to prevent unnecessary foreclosures.
"He was consistently warning about the excesses of sub-prime mortgage lending," said Michael Calhoun of the pro-consumer Center for Responsible Lending. "He was one of the leaders out front early on in the financial crisis."
"He was consistently warning about the excesses of sub-prime mortgage lending," said Michael Calhoun, president of the pro-consumer Center for Responsible Lending, based in North Carolina. "He was one of the leaders out front early on in the financial crisis."
FHFA spokeswoman Stefanie Johnson said DeMarco congratulated Smith on his nomination and would stay on to work with Smith on a smooth transition.
The agency has had a tangled history. Created in summer 2008, it had new powers to regulate Fannie and Freddie that its predecessor, the Office of Federal Housing Enterprise Oversight, lacked.
But those powers came too late. Fannie and Freddie had loaded up on investments in risky mortgage-backed securities and were veering toward collapse as the housing market spiraled downward.
Before that, OFHEO had tussled with both Fannie and Freddie over accounting scandals. Whenever OFHEO would push for tighter regulation, Fannie and Freddie, rich in those days, deployed armies of lobbyists to deflect tighter oversight.