Housing regulator who clashed with Democrats exiting government

A former top housing regulator who butted heads with congressional Democrats and the White House is leaving the government.

Edward DeMarco, former acting director of the Federal Housing Finance Agency (FHFA), announced Monday that he will leave the agency at the end of April. He didn't announce his future plans. 

ADVERTISEMENT
DeMarco, who led the FHFA for four years, had been expected to stay with the agency to help new FHFA Director Mel Watt get settled in his new job as the regulator of mortgage giants Fannie Mae and Freddie Mac.

“Ed has been an invaluable asset to FHFA and I appreciate his assistance to me during this transitional period,” Watt said in a statement.

“Throughout his 28 year career as a public servant he has made many important public policy contributions grounded in his strong background in housing finance. I wish him the very best in his future endeavors.”

DeMarco was appointed acting FHFA director in August 2009 and held the job until January, when Watt was sworn in as the permanent head of the agency.

"I appreciate your invitation to assist you with the recent leadership transition and I have been pleased to do so,” DeMarco wrote in a letter to Watt.

“I am also grateful for the thoughtfulness you have shown me during this transition period. With the transition now well along, I believe the time has come for me to seek other opportunities.”

DeMarco had a contentious relationship with the White House and congressional Democrats who pressed him to allow for mortgage principal reductions to help struggling homeowners and, in turn, boost the housing market’s recovery. 

But DeMarco remained steadfast against the appeals, arguing that the policy would lead to abuse and put taxpayers at risk.

That led many Democrats to demand that President Obama find a replacement for DeMarco.

The rift widened further when the FHFA released a study showing the possible benefits of reducing principal but DeMarco refused to implement the policy on the grounds that "the potential benefit was too small and uncertain relative to known and unknown costs and risks.”

Watt was confirmed by the Senate in December, after a couple of attempts to push through his nomination. 

Senate Republicans argued that Watt lacked the experience and was too political a pick to run the agency. 

All told, taxpayers sank $188 billion into Fannie and Freddie to keep them afloat during the financial crisis. While they have returned more than that in profits to the Treasury Department, it doesn't officially reduce their debt. 

Senate Banking Committee leaders have announced bipartisan legislation that would eventually wind down Fannie and Freddie and create a new system designed to reduce the government's role and attract more private investment while better protecting taxpayers from any major economic shocks.

"I have publicly stated numerous times that the conservatorships of Fannie Mae and Freddie Mac were never intended to be a long-term solution," DeMarco wrote. "Congress must act to bring the conservatorships to an end and chart the course for a new structure for housing finance."

Last week, Tom Miller, Iowa’s attorney general, made the case that completion of a major mortgage settlement proved how valuable mortgage principal reduction is to helping homeowners and the housing market recovery and he was hopeful that Watt would eventually consider the policy. 

In October 2006, DeMarco joined the Office of Federal Housing Enterprise Oversight, a predecessor agency to FHFA, as its chief operating officer and deputy director.

He was appointed acting director of FHFA on Aug. 25, 2009, and served in that role until Jan. 6.

"We also built a new agency during this period. Whatever the future holds, the country needs an agency expert in the workings of our housing finance system and I am proud that FHFA has developed the capabilities to take on that responsibility," DeMarco wrote.