Treasury Department takes over Freddie Mac, Fannie Mae
In another new twist in the struggling mortgage market, the federal government has placed the country’s top two mortgage lenders — government sponsored entities Fannie Mae and Freddie Mac — under the “conservatorship” of the Federal Housing Finance Agency (FHFA), effectively putting the two companies under government control.
The “up to” $200 billion bailout of the organizations potentially saddles taxpayers with billions of dollars in losses.
The announcement came Sunday, as the federal government sought to stabilize the mortgage giants, which combined hold nearly 50 percent of the country’s $12 trillion in mortgages, including 70 percent of all new home loans. In the past year, the two companies have lost approximately $14 billion.
Treasury Secretary Henry Paulson told media outlets the move was meant to restore stability to the crumbling housing market, a stabilizing plan necessary to help the nation’s economy and financial markets regain their footing.
As part of the move, the federal government also will replace the CEOs and boards of directors at the mortgage giants. Fannie Mae CEO Daniel Mudd has already been replaced by Herbert Allison, former CEO of TIAA-Cref; while Freddie Mac CEO Richard Syron has been replaced by David Moffet, vice chairman of U.S. Bancorp.
The Treasury’s takeover is primarily meant as a stopgap measure to keep the two companies floating until next year, when a new presidential administration will determine the long-term future of Fannie and Freddie.
Former Westlake execs open True Value store
Former Westlake Ace Hardware executives Brian Richards and Scott Westlake have formed their own True Value hardware chain, called SCW. The first store opened Aug. 30 in Overland Park, Kan.
Called Nuts and Bolts, the store is 51,000 square feet, about three times the size of a traditional True Value outlet. A second, 28,000-square-foot Nuts and Bolts is set to open sometime in September in Independence, Mo.
Both stores are based on the Destination True Value format, which emphasizes small projects and offers a broad product selection in core hardware categories that can be adapted to the needs of the individual store.
In addition to the traditional hardware departments, Nuts and Bolts offers a 4,000-square-foot customer service center where customers can get glass and keys cut, window screens repaired and knifes and scissors sharpened. The store has about 40 employees.
Richards, the company president, spent more than 30 years with Westlake — a 90-store chain with stores in Missouri, Kansas, Nebraska, Iowa, Oklahoma, Texas and New Mexico — before partnering with Scott Westlake, the grandson of Westlake Ace’s founder.
Toll Brothers posts third-quarter loss
Toll Brothers, one of the nation’s largest home builders with a specialty in luxury homes, saw third-quarter losses of $29.3 million, plummeting from earnings of $26.5 million in the same period last year.
The Horsham, Pa.-based builder recorded a hefty $139.4 million pre-tax charge, $33.4 million of which was attributed to failed joint venture agreements. For the first nine months of the fiscal year, the builder has generated losses totaling $219 million.
Home-building revenues totaled $1.24 billion in the third quarter, down 31 percent from $1.8 billion in the same period last year.
Robert Toll, chairman and CEO for Toll Brothers, pulled no punches in his assessment of the results: “We are now completing the third year of the worst housing market since we started in 1967,” he said.
“Weak consumer confidence has kept many potential buyers from taking advantage of the current buyers’ market,” he noted. “We believe that most big public builders have sold off most of their inventory, which eventually should help stabilize home prices. However, we currently have to contend with foreclosures as the new low-priced competition.”