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U.S. Senate rule change paves way for Watt to take housing post

Representative Mel Watt testifies before the Senate Banking, Housing and Urban Affairs Committee confirmation hearing to be the regulator of
Representative Mel Watt testifies before the Senate Banking, Housing and Urban Affairs Committee confirmation hearing to be the regulator of

By Margaret Chadbourn

WASHINGTON (Reuters) - U.S. President Barack Obama's pick for a top housing regulatory post looked poised to win confirmation after the Senate changed its rules on Thursday to make it harder to block nominees.

If confirmed to head the agency that regulates housing finance giants Fannie Mae and Freddie Mac, Democratic Representative Mel Watt could open the door for the taxpayer-controlled firms to provide greater mortgage relief, in line with White House economic goals.

The current head of the Federal Housing Finance Agency, Edward DeMarco, is a career civil servant who has knocked heads at times with the Obama administration on homeowner-relief programs as he has sought to conserve the companies' assets.

That focus has endeared DeMarco to Republicans, who successfully blocked Watt's nomination in a vote last month. The filibuster marked the first time since the Civil War that the Senate failed to confirm a sitting member of Congress.

The Republican action helped spur Senate Majority Leader Harry Reid, a Nevada Democrat, to push through a change in the Senate filibuster rules on Thursday.

Previously, 60 votes were needed to clear procedural hurdles in the 100-seat Senate. Now, a simple majority suffices for all but Supreme Court nominees - a change that virtually guarantees Watt's confirmation given that Democrats control 55 votes.

Homeowner and consumer advocacy groups have lobbied hard for Watt's approval. They argue that DeMarco, who became the FHFA's acting director in 2009, has not implemented programs that could help borrowers who are having trouble making mortgage payments.

Analysts expect Watt to allow Fannie Mae and Freddie Mac to forgive loan principal for Americans who owe more on their mortgages than their homes are worth - a step the White House has advocated but one that DeMarco had refused to take.

"If Watt is confirmed, we would expect the FHFA to work towards some form of principal reduction and institute specific changes to Fannie and Freddie refinance efforts," said Isaac Boltansky, an analyst with Compass Point Research and Trading.

Watt would also become an influential voice in the debate over the future of Fannie Mae and Freddie Mac.

The companies, which own or guarantee about two-thirds of all U.S. mortgages, were seized by the government in 2008 during the financial crisis and propped up with about $187 billion in taxpayer funds. They have since returned to profitability.

Both Republicans and Democrats want to wind them down and take steps to ensure taxpayers are never on the hook again, but Democrats want to ensure some government support for housing remains.

With Watt at FHFA, the administration could avoid any awkward political fights when it comes to expanding credit to borrowers. Analysts expect Fannie Mae and Freddie Mac would increase their refinance activity under his oversight.

Watt is a two-decade veteran of the U.S. House of Representatives and has the support of the Congressional Black Caucus, of which he is a member. He is also a member of the House Financial Services Committee, which oversees housing matters. While in Congress, Watt has pressed for increased access to credit for minority and low-income consumers.

(Reporting by Margaret Chadbourn; Editing by Jim Loney)

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