It was the blockbuster news of the month, perhaps the year: On Sept. 7, the federal government announced a plan for the Federal Housing Finance Agency to take over the country’s two biggest mortgage lenders, Fannie Mae and Freddie Mac, placing the troubled government-sponsored entities under a “conservatorship.”
The FHFA will now oversee the goings-on at the two lenders, with the ultimate goal of greatly reducing their mortgage portfolios. While Fannie Mae and Freddie Mac hold just under 50 percent of the total mortgage market, Fannie and Freddie hold 70 percent of all new home loans. In the past year, the two companies have lost approximately $14 billion.
“Any time you have to have the federal government take over two companies, we’re disappointed in the circumstances that led to that,” said Jerry Howard, executive vp and CEO of the National Association of Home Builders (NAHB).
“But we’re convinced that the squeamishness of the global capital markets, the size of the debt and equity issuances of Fannie Mae and Freddie Mac, relative to the rest of the economy, are so important—and the viability of these companies going forward is so important—that something had to be done,” he told Home Channel News.
The viability of the two mortgage giants—which together control $12 trillion of mortgages—is obviously a key concern. But to many in the home improvement industry, the visibility of the two organizations, and their well-publicized difficulty, has put the biggest dent in the housing market. Changing the national attitude toward home building, home buying and home improvement starts with giving consumers greater confidence, which has been lacking as Fannie and Freddie struggled.
Around the home channel, executives adopted varying degrees of optimism for the blockbuster move. Home Depot CEO Frank Blake, addressing a group of Cobb County Chamber of Commerce members just following the decision, said the conservatorship staves off what could have been a “much worse” outcome. While he said he didn’t know how the move would directly affect the home improvement market, he said he considered it a “necessary step.”
Meanwhile, the bailout temporarily boosted the Wall Street performance of a number of home improvement retailers. Shares of Home Depot and Lowe’s gained 5.5 percent and 6.3 percent respectively on the Monday following the weekend announcement. Other h