More Noises About Administration Firing Ed DeMarco After the Election
Zach Carter find yet another indicator that, after the election, Barack Obama plans to fire Federal Housing Finance Agency Administrator Ed DeMarco. But this claim has even less meat on its bones than the previous pledge.
It comes from Bank of America analyst Ralph Axel, who argues that the Administration plans to use housing policy as its “secret weapon”:
Firing DeMarco, Axel said, would unleash a “secret weapon” to boost the economy by allowing more borrowers to refinance their mortgages […]
“Although DeMarco has agreed to some stimulus programs, including an expansion of the HARP program, much more can be done,” Axel wrote in a note to clients dated Friday, Nov. 2. “We would expect to see President Obama use the recess appointment to replace DeMarco in December were he reelected […]
“The FHFA director unilaterally decides on guarantees and other fees, underwriting standards, rules relating to loan repurchase requests, rules for loan modifications including principal write-downs,” Axel wrote, saying that replacing DeMarco “could be a major game changer.”
Carter is being a bit imprecise here. DeMarco is already allowing refinancing on GSE loans through HARP 2.0. Those appear to rise and fall on the basis of mortgage interest rates; refinancing applications have dropped for four straight weeks, for example. I don’t know how much more DeMarco or a potential replacement could boost refis. However, Axel does correctly peg the power of FHFA on guarantee fees and loan modifications. Presumably the Administration doesn’t undertake this unless they have a plan for a replacement, probably through recess appointment, who would approve of principal reductions.
But where exactly is Axel getting his information? First of all, it defies logic that, if the plan is to fire DeMarco, you wouldn’t do it BEFORE the election, to at least get some tangible benefit out of it. Firing him in December does nothing electorally, though economically it could help. Second of all, you have to put up this stated commitment to principal reduction at the GSEs, controlled by FHFA, with the action on principal reduction through HAMP, controlled by Treasury. And HAMP principal reductions remain virtually non-existent. If the White House thought this was a good strategy they would enact it through their own channels.
I’m just not seeing an Administration last seen touting the housing “comeback” being all that interested in removing their convenient foil for why housing isn’t improving as significantly as critics want. But I’m happy to be wrong.