WL Ross & Co. Hires Fannie, Freddie Regulator

A key federal regulator is going to work for Wilbur Ross, a billionaire investor who specializes in making big profits through buying up bad debt.

James Lockhart, 63, director of the federal agency that regulates mortgage finance companies Fannie Mae and Freddie Mac, will become vice chairman of WL Ross & Co., the distressed investment affiliate of Atlanta-based Invesco Ltd.

Lockhart's last day as director of the Federal Housing Finance Agency is Friday. He'll start work for Ross next month. Ross is known for investing in companies in troubled industries and turning them around as leaner, cheaper operations.

"It just seemed to me very natural to be moving into the world of trying to fix financial services companies and help the economy recover," Lockhart said in an interview.

Lockhart, appointed more than three years ago by former President George W. Bush, a childhood friend and Yale fraternity brother. He stayed under President Barack Obama to help Fannie Mae and sibling company Freddie Mac stabilize after they were seized by the government last fall.

Ross and Lockhart have known each other since the early 1990s, when Lockhart headed the government-run Pension Benefit Guaranty Corp. and Ross was advising creditors in a steel company bankruptcy.

Ross spent more than 20 years as a bankruptcy specialist at the investment firm Rothschild Inc. before establishing a private equity firm in 2000. Two years later, his company paid $127 million for the remnants of Cleveland-based LTV Steel, later forming International Steel Group with the pieces of Bethlehem, Weirton, Acme Steel and Georgetown Steel.

He merged the company in 2004 with Netherlands steel tycoon Lakshmi Mittal for $4.5 billion in cash and stock.

Lately, he has been snapping up troubled mortgage companies, including the loan servicing operation of the now-defunct American Home Mortgage Investment Corp. and Option One, formerly H&R Block Inc.'s troubled mortgage business. Earlier this year, Ross's company paid Citigroup Inc. $1.5 billion for the right to collect payments on 185,000 loans.