The news that Obama has nominated Congressman Mel Watt to head the Federal Housing Finance Administration, which oversees Fannie Mae and Freddie Mac, is potentially a huge deal, with possible long term consequences for untold numbers of struggling homeowners — and, by extension, the health of the economy. There are two key questions to be asked about Watt, who would replace the Bush-appointed Ed DeMarco, who has been widely pilloried by liberals for refusing administration requests to allow Fannie and Freddie to offer debt relief to distressed home borrowers.

The first: Is he a good pick for progressives and struggling homeowners? The answer to that one will turn on whether he supports using the agencies to relieve distressed home borrowers and whether he supports an aggressive stance towards mortgage lenders and investors when it comes to the ongoing foreclosure crisis.

The second: Does Watt, who is quite liberal, have any chance at all of getting confirmed in  the face of GOP opposition? That’s crucial to the left, because it’s critical that DeMarco be dislodged, in order to help distressed homeowners, which is urgent both for their sake and for the economy.

On the first point, two top liberals — Senator Elizabeth Warren and Dem Rep. Keith Ellison, the co-chair of the Congressional Progressive Caucus — both assured me that Watt is a solid choice for the left. “Mel Watt is the strongest consumer advocate you’re going to get,” Ellison told me. “He has a clear record on fighting predatory lending and protecting home owners. He is a key author of Wall Street reform. He is the kind of person homeowners can trust.”

Indeed, Watt is on record supporting “principal reduction,” i.e., helping distressed borrowers with loans backed up by Fannie Mae and Freddie Mac. Watt, along with other House Dems, signed a letter calling for it to be included in the fiscal cliff deal. So presumably he’ll support it if confirmed to head the new agency, though he should be asked this during the confirmation process.

Some liberals, such as David Dayen and Matthew Yglesias, have noted that Watt has received a good deal of financial contributions from the banking industry and that he’s likely to be a reliable ally of banks headquartered in his home state of North Carolina. These are legitimate concerns, since the question is whether this would mean Watt would not be confrontational enough with mortgage lenders and investors when it comes to defending homeowners still struggling in the foreclosure crisis. It could allow GOP attacks to muddy the waters on which party is beholden to Wall Street.

I asked Senator Warren to respond to these concerns. “He has a long, established track record of working for families and strengthening the communities they live in,” Warren said. “If that puts him at odds with mortgage lenders and Wall Street investors, I think he has the courage to stand up and do what’s right.”

Warren noted that part of the new gig will be “monitoring the mortgage lenders as they deal with the families who are in trouble on their payments,” which would mean “mortgage lenders will advocate a point of view that he will have to evaluate.” But she added that the more important part of the job is to “set the policies for Fannie and Freddie, both in terms of new lending but also in terms of dealing with homeowners in financial trouble.”

“He works for families — that’s what he’s done in the House,” Warren said. “I have no doubt that’s what he will do in heading up this new agency.”

“Principal reduction is the top line thing,” Tracy Van Slyke, the head of New Bottom Line, a coalition of liberal groups fighting for distressed homeowners, told me. “We anticipate he’ll be very good on that.”

The need to get rid of DeMarco and help homeowners now is why it’s crucial Watt be confirmable. Is he? Ellison said he believes that Watt’s relationship with the banking community might even be a plus on this score. “Someone exclusively associated with consumer protection would probably get overwhelming opposition from industry,” Ellison said. “But he listens to both sides. They can walk into his office and know that they’ll be heard.”

Asked if he worried about industry’s contributions to Watt, Ellison said: “If his record proves anything it’s that those donations don’t mean anything to him.”

In the end, replacing DeMarco is what’s critical. “It’s time for Ed DeMarco to go,” Warren said. “He rejected policies that would have helped families and helped the economy recover faster.”