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Economist Zandi said to be candidate for key federal housing post

April 15, 2013|By Jim Puzzanghera
  • The Obama administration has been trying for several years to find a replacement for Edward DeMarco, acting director of the Federal Housing Finance Agency. Above, DeMarco testifying before the House Financial Services Committee last month.
The Obama administration has been trying for several years to find a replacement… (Jim Watson / AFP/Getty Images )

WASHINGTON -- Economist Mark Zandi reportedly is being considered by the Obama administration to head the federal agency that oversees taxpayer-owned Fannie Mae and Freddie Mac as the White House seeks a candidate who could avoid Republican opposition in the Senate.

Zandi, chief economist at Moody's Analytics and a former economic advisor to 2008 Republican presidential nominee John McCain, is being looked at as a nominee for director of the Federal Housing Finance Agency, the Wall Street Journal reported Saturday.

Zandi would replace the agency's controversial acting director, Edward J. DeMarco.

Rep. Mel Watt (D-N.C.) is also considered a top candidate to repace DeMarco. But many Senate Republicans have supported DeMarco and are likely to block the nomination of a longtime Democratic lawmaker. The White House apparently hopes that Republicans would be more amenable to Zandi.

Zandi and a White House spokeswoman declined to comment Monday.

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The White House has been working for several years to replace DeMarco, who has angered many Democrats and liberal activists by refusing to allow Fannie and Freddie to reduce the principal on mortgages it backs to help struggling homeowners avoid foreclosure.

The FHFA has overseen Fannie and Freddie since they were seized by the government in 2008 to keep them from falling into bankruptcy. The government now owns 80% of both companies.

DeMarco, a career civil servant, has been acting director since mid-2009. He took over after James Lockhart, a political appointee of President George W. Bush, stepped down as FHFA director.

The White House floated Zandi's name as a trial balloon to gauge Republican reaction, said Jaret Seiberg, a senior policy analyst in Washington with financial services firm Guggenheim Partners.

He said Zandi has favored the use of principal reductions by Fannie and Freddie, though in 2012 suggested a compromise that would allow homeowners to earn the principal reductions over time if they can stay current on lower monthly payments.

Last month, California Atty. Gen. Kamala Harris and attorneys general from eight other states wrote to the president urging him to replace DeMarco with someone who would do more to help reduce foreclosures.

DeMarco has argued that he has ordered Fannie and Freddie to take numerous steps to ease foreclosures, particularly by modifying the terms of mortgages. But he has said reducing the amount of principal owed by some homeowners could end up costing taxpayers money and encourage more defaults.

Many Republicans have praised DeMarco's stance, saying he was protecting the government's investment in Fannie and Freddie. As of March 29, the government has pumped a combined $187.5 billion in bailout money into the companies.

The overall tab for taxpayers is less because Fannie and Freddie have paid a total of $65 billion in required dividends back to the Treasury.

The finances of both companies have improved. Both recently reported they were profitable in 2012, the first time in six years. And Obama's proposed budget released last week for the first time projected a net profit to taxpayers of $51 billion through 2023 on the investments in Fannie and Freddie.

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