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Trump picks Mark Calabria to lead FHFA

President Donald Trump has nominated conservative economist Mark Calabria to lead the Federal Housing Finance Agency overseeing Fannie Mae and Freddie Mac.

The White House made the announcement official late Tuesday after it was earlier reported by the Wall Street Journal. If confirmed, Calabria, the current chief economist for Vice President Mike Pence, would begin a five-year term in early January, when current FHFA Director Mel Watt’s term expires.

calabriaThe pick is bold, though, and bound to face opposition from Senate Democrats, who in December attempted to block Trump’s pick to lead the Consumer Financial Protection Bureau and have delayed other nominations to key housing posts for months.

When serving previously as director of financial regulation studies with the Cato Institute, Calabria took several controversial positions in articles and blogs on housing finance and on the government-sponsored enterprises (GSEs) overseen by FHFA. Among these, he has advocated for placing the GSEs into a receivership where the government would likely be much more aggressive in moving the companies into a new system.

He has advocated for ending their affordable-housing mandates, which would put him at odds both with Democrats and affordable-housing advocates. He also has written in favor of either breaking up the GSEs into several parts or re-chartering the GSEs as bank-holding companies that would compete against other similarly charted entities. Those positions are opposed by organizations representing small banks and nonbanks.  

Calabria also has been a critic of mortgage securitization, which goes to the heart of what the GSEs do in buying loans, packaging them with a government guarantee and selling them to investors. This securitization process has created market space for nonbanks to thrive, given they don’t typically hold loans on their books and less capital reserves.  

Calabria has recommended imposing a minimum 5 percent downpayment on GSE loans, a move that would squash the fledgling 3 percent downpayment programs. He also said that GSE loan eligibility should be based on income levels, and not loan limits. Only the United States Department of Agriculture (USDA) loan program currently has income restrictions.

Congress would have to enact legislation to make changes to the GSEs charters. As director of the FHFA and the conservator of the GSEs, Calabria would have the power to force the GSEs to modify their programs, and reduce their footprint on the market.

According to one industry insider speaking on condition of anonymity, Calabria would likely take steps to reduce Fannie and Freddie's role in the multifamily space, and also shrink the GSE role in areas where the private sector could step in, but not where the GSEs are most needed.

"He is extremely knowledgeable – and as an Administration appointee, I think he gets it that they don’t want to roll back mortgage lending at a time when there are some concerns about the economy softening," the source said. 

As of Wednesday morning, most major mortgage trade groups had yet to react to the nomination. The Mortgage Bankers Association issued a statement congratulating Calabria.

“He has a deep background in housing-finance issues, and we have enjoyed a good working relationship with him in his current and past roles,” MBA President Bob Broeksmit said in the statement.   

"We look forward to working with him on a wide variety of housing-finance issues, not the least of which is resolving the now decade-long conservatorship of Fannie Mae and Freddie Mac in a way that best serves borrowers, protects taxpayers and ensures equal access to stable and liquid secondary mortgage markets for a wide variety of single-family and multifamily lenders, regardless of size or business model,” Broeksmit added.   

The nonbank trade group, the Community Home Lenders Association, also praised Calabria as "extremely well qualified to tackle the challenges of housing finance reform and preserving access to the GSE market for both lenders and consumers." 

The National Association of Realtors President John Smaby issued a statement, noting Calabria's housing experience, including as a former NAR economist. Smaby urged housing reforms that retain a "deep and affordable mortgage market" and protects an explicit government guarantee on the securities issued by Fannie and Freddie.


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