While the degree to which the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corp. (Freddie Mac) should be backed by the federal government (and the American taxpayer) is a hot topic of debate on Capitol Hill, the leader of one high-powered housing industry think tank believes the two government-sponsored entities (GSEs) will weather the current housing crisis largely intact. Richard Green, Ph.D., director of the University of Southern California's Lusk Center for Real Estate (who once worked at Freddie Mac for a year), says the long-term lesson of the current housing crisis is that we really need these institutions, especially at times like this. "A few years ago, there was talk that the GSEs were irrelevant because the private sector was funding mortgages," Green says. "But now, outside of Fannie and Freddie, the private sector has mostly gone away. The idea that we can keep liquidity in the mortgage market, in all periods, without institutions that are — in some way — involved with government is, I think, naïve."
Green points out that Fannie was, in fact, a government agency for 30 years, backed by the full faith and credit of the U.S. government until it was privatized in 1968 by the Johnson Administration. "We've gone through periods like this before," Green says. "In the early 1980s recession, credit losses were even higher, so I think both Fannie and Freddie will survive. Raising their capital limits makes sense. We now know they need more capital to withstand stress."
— Bill Lurz
Sales Jobs First to Go
Woodstock, Ga.-based Robert Harris Homes shut down, and the first to go was its sales staff in early July. The company reported it has been plagued with work stoppages because bills went unpaid, frustrating subcontractors and potential buyers. Restructuring debt failed. In a letter to his employees, founder Bob Harris said, "Over the last several weeks, management, shareholders and a capital restructuring firm have been working with our senior lenders on a revised debt program. It now appears that we are at an impasse on these negotiations and will seek other avenues of restructuring."
Toll Brothers' Status Falls to Junk
Toll Brothers, the Horsham, Pa. home builder, had the misfortune of having its credit rating drop to junk status by Moody's Investor Service. As reported in a Bloomberg report, Moody's representatives said, "While the company is one of the only remaining home builders that is currently generating earnings before impairment charges, Moody's does not expect this to continue, as falling prices and lower absorption rates continue to impact margins."
New VP for William Lyon Homes
Tom Mitchell has been promoted to executive vice president, business development and operations, William Lyon Homes announced. In his new role, Mitchell will oversee business developments, leading the strategic efforts to identify business opportunities.
Danisch Joins Simonton Windows