Kevin Warsh confirmed as Fed chair as mortgage lenders look for stability

The Senate confirmed Kevin Warsh on Wednesday to succeed Jerome Powell as chairman of the Federal Reserve, sparking hopes within the mortgage industry for less volatility as Warsh takes the helm of the central bank.

Warsh, President Donald Trump’s nominee to serve as the 17th Fed chair, was previously confirmed as a board member on Monday. As a former Fed governor who served during the 2008 financial crisis, he brings a deep foundation in capital markets and monetary policy to navigate the current macroeconomic landscape.

“The mortgage industry depends on a healthy and predictable rate environment,” said Joe Panebianco, CEO at AnnieMac Home Mortgage. “Warsh will have to work hard to gain consensus amongst a Fed divided on inflation concerns, Fed independence and overall approach to forward guidance. But we believe they will find their way through all of this in a way that will continue to make housing and homeownership a major pillar of the U.S. economy.”

Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA), issued a statement in which he congratulated Warsh and offered remarks on how the central bank can engage with housing industry stakeholders.

“We look forward to continued engagement on policies affecting the banking and housing finance systems and will continue advocating for a more balanced and risk-aligned approach to capital standards affecting mortgage lending and commercial real estate finance,” Broeksmit said.

“This includes our recommendations on the Basel III re-proposal, which will include reducing the risk weight on mortgage servicing assets to 100% and eliminating their cap included in Tier 1 capital, reducing the risk weight to 50% on warehouse lending lines, and better calibrating capital requirements for commercial and multifamily real estate lending and community investment activities.”

In Powell’s final meeting as Fed chair two weeks ago, the Federal Open Market Committee (FOMC) held its benchmark interest rate steady at a target range of 3.5% to 3.75%, marking its third consecutive pause. But there were some dissenting opinions expressed.

While eight officials voted for the pause, Stephen I. Miran preferred to lower the target range by 25 basis points. Additionally, three officials backed the decision to hold rates but objected to recent language about an “easing bias” that suggested the Fed is moving closer to a rate cut rather than a hike.

During his confirmation hearing, Warsh faced sharp questioning from senators but asserted that he would not be the president’s “sock puppet” when determining interest rates. Democrats repeatedly pressed Warsh on his relationship with Trump and his willingness to defy the president.

Stan Holland, president of Atlantic Bay Mortgage Group, said he is hopeful that Warsh’s appointment will create “stability for the industry.”

“While some expect that, under his leadership, the Fed could lower short-term rates quickly, we hope that the long-term curve is kept in mind, as that has the biggest impact on homebuyers,” Holland said. “We also support policymakers considering proven tools such as quantitative easing and the GSEs’ purchases of MBS, which have historically helped improve mortgage affordability and stabilize housing markets during periods of economic uncertainty.”

The ongoing conflict in Iran, inflationary concerns and a slow but stabilizing job market have kept mortgage rates higher for a second straight week. According to HousingWire’s Mortgage Rates Center, rates for 30-year conforming loans stood at 6.5% on Wednesday, up 4 basis points from one week ago. 

Lindsey Johnson, president and CEO of the Consumer Bankers Association (CBA), noted that the new chair is stepping in at a critical time.

“Kevin brings a rare combination of experience, credibility, and steady leadership at a pivotal moment for the U.S. economy,” Johnson said. “His deep understanding of financial markets and the banking system will be critical as policymakers work to support growth and expand opportunity for American households and businesses.”

Warsh’s tenure as chairman begins shortly after the Department of Justice dropped its investigation into the Fed regarding Powell’s congressional testimony on a $2 billion headquarters renovation project. The DOJ’s move cleared a major political obstacle for Warsh’s confirmation, and the case was directed to the Fed’s internal watchdog for review.

Powell confirmed he will remain on the board as a governor after his term as chair ends May 15, keeping a low profile “for a period of time to be determined.” He added that the DOJ provided assurances that it will not reopen its investigation into his previous testimony absent a criminal referral from the Fed’s inspector general.