Deciphering the Fannie-Freddie takeover

Over the past week it seems like television news has devoted most of its programming to Hurricane Ike, gas prices, the upcoming presidential election and the federal government's takeover of mortgage giants Fannie Mae and Freddie Mac. While all four stories affect our country's financial market, the somewhat complicated Fannie-Freddie situation in particular has caught my attention.

The government obtained 79.9 percent of each company Sept. 7 with the hopes of reversing the housing and credit crises. While both presidential candidates praised the move, private analysts worried that it may not be enough to stabilize the slumping housing market given the glut of vacant homes for sale, rising foreclosures, rising unemployment and weak consumer confidence.

The initial fallout the day after was an increase in the stock value of banks and a drop in the mortgage rate.

Economic experts I talked with throughout the week all agreed that the takeover of the two mortgage lenders was a necessary move, considering the two companies have lost $14 billion in the last year and are likely to pile up billions more in losses until the housing market recovers.

Southeast Missouri State University economics professor Bruce Domazlicky said that although the news is positive for homeowners, the move could cost taxpayers billions of dollars. Since the government owns a bulk of the mortgage market, its represents a potential dramatic increase in the country's overall debt if things go south.

"The final cost ultimately depends on the value of the assets they hold or guarantee versus what the mortgages are on those assets," he said.

As for the effect on banks, Domazlicky believes the move will assist the financial institutions by helping to firm up the mortgage market. A recent survey of Midwestern bankers found that 80 percent of them supported the takeover.

"This should provide a substantial boost in the confidence factor as investors return to the market to purchase loans from Fannie and Freddie," said Regions Bank mortgage loan originator Ken Schmitz. "Home sales should rise and interest rates, hopefully, will trend lower."

Matthew Locke, president of the Mortgage Bankers Association of Missouri, is optimistic about the future, despite the risks involved.

"Nobody wanted to go down this path, but it was the best solution," he said. "We've already seen positive results such as the increase in stocks and decrease in mortgage rates.

"This will encourage people to buy homes," he said. "In the near future we'll see the housing market improve and this situation will be behind us."

What will become of the housing market? I defer to famous philosopher and New York Yankee catcher Yogi Berra, who would probably have other financial experts in aggreement when he said "I wish I had an answer to that because I'm tired of answering that question."

* Jasper's remodeling: Since construction on Independence Street in Cape Girardeau began in July, businesses have reported decreased sales. One business has taken a proactive approach and has used the time to remodel. Jasper's convenience store at the corner of North West End Boulevard and Independence Street closed Sept. 8 and will reopen sometime in mid-October.

While Keith Boeller, president of Jasper's parent company Rhodes 101, did not reveal specific plans, he said customers will be pleased with what the renovated store will offer its patrons.

"The store was starting to age, and we decided this was the perfect time to freshen it up," Boeller said. "Once we reopen, I think our customers will notice our more attractive look."

* Walden Park news: Realty Executives of Cape County has been awarded the exclusive sales and leasing contract for Walden Park, a master planned community in Cape Girardeau.

"We believe that Walden Park will offer a wide range of home buyers the choice, architecture and green space they're looking for in today's market," said lead real estate agent Susan Cole. "Whether it's an individual or couple looking for luxury town house living, or a family looking for the classic American home in the classic American neighborhood, Walden Park is a place they can call home."

Walden Park is a master planned community, designed in what is commonly referred to as the new urbanist style. New urbanist neighborhoods are designed to contain a diverse range of housing and to be walkable. Designed by Dallas-based Humphreys & Partners Architects LP, Walden Park is made up of single family homes, town homes and estate lots for custom homes.The development also incorporates a respect for preservation of its natural surroundings. Parks, playgrounds, clubhouse and a pool are included in the development.

* Seabaugh Custom Hardwood Floor wins two awards: Seabaugh Custom Hardwood Floor, 1709 Huntington Drive in Cape Girardeau, won the Best Kitchen/Dining Room and Best Living Room/Family Room during the National Wood Flooring Association Wood Floor of the Year Contest. Held in Fort Lauderdale, Fla., earlier this year, the competition received a record 232 entries from the United States, Canada, Austria, Ireland and Malasia. Entries were judged by members of the association both online and at the four-day convention.

The association is a not-for-profit trade organization of more than 400 wood flooring professionals working worldwide to educate consumers, architects, designers and builders in the uses and benefits of wood flooring.

* Organization to launch "going green" initiative: The "go green" movement seems to have a presence in many buildings, restaurants and media outlets these days. Earlier this year NBC devoted an entire week to this initiative, including on one of my favorite shows, "The Biggest Loser."

Many Southeast Missouri businesses are already taking steps to 'go green' and reduce their contribution to climate change. The Southeast Missouri Climate Protection Initiative plans to recognize those businesses they believe are making efforts to be environmentally friendly through the "Local Businesses Going Green" initiative this fall.

The organization is asking interested businesses to e-mail them at semocpi@gmail.com with queries or to identify themselves and provide a list of what they have already done or are planning to do.

Examples of green changes might include replacing light bulbs with compact fluorescent light bulbs or light-emitting diodes, establishing a program for reducing, reusing and recycling, reducing business-related fuel and energy consumption, proving flexible work schedules to avoid rush hours and encouraging employees to carpool or drive energy-efficient vehicles. The organization anticipates that by making this list available to consumers, area residents seeking green businesses will be able to find them and reward the businesses for their efforts. Visit cstl.semo.edu/SEMOCPI for more information.

Business reporter Brian Blackwell can be reached at 335-6611, extension 137, or bblackwell@semissourian.com.