ADVFN Logo
Registration Strip Icon for default Register for Free to get streaming real-time quotes, interactive charts, live options flow, and more.
Fannie Mae (QB)

Fannie Mae (QB) (FNMAG)

17.50
0.40
(2.34%)
Closed December 09 4:00PM

Real-time discussions and trading ideas: Trade with confidence with our powerful platform.

FNMAG News

Official News Only

FNMAG Discussion

View Posts
mrfence mrfence 4 minutes ago
HOWARD ON MORTGAGE FINANCE
Commentary on current mortgage finance issues

Release 2.0
December 9, 2024 ~ 12 Comments
On November 30, 2016, President-elect Donald Trumpโ€™s choice for Treasury Secretary, Steven Mnuchin, said, โ€œIt makes no sense that [Fannie Mae and Freddie Mac] are owned by the government and have been controlled by the government for as long as they have,โ€ adding, โ€œwe gotta get them out of government controlโ€ฆ.and in our administration itโ€™s right up there in the list of the top ten things weโ€™re going to get done, and weโ€™ll get it done reasonably fast.โ€

The first Trump administration, of course, never did. Mnuchin has not addressed this issue publicly, but former FHFA Director Mark Calabria does discuss it in his book, Shelter from the Storm, albeit briefly and vaguely, and essentially blaming Mnuchin. He states, โ€œSecretary Mnuchin generally felt that any option had to maintain Treasuryโ€™s priority in the capital structure. Treasury could be heavily diluted, and almost certainly would have to be, but it did not want to see that accomplished by losing its standing.โ€ Later Calabria says, โ€œWe were ready to conduct a restructuring by late summer 2020โ€ (without specifying how they were planning to deal with Treasuryโ€™s senior preferred stock or its liquidation preference in the companies,) and goes on to ask, โ€[since] we had well-developed restructuring plans by late summer 2020, why did none of them happen? First, I believed both the Treasury and the White House wanted to push the issue until after the election. Since any change had the potential to create short-run volatility in the mortgage market, I believe the administration did not want to run that riskโ€ฆ.[Then], once the election was behind us, Mnuchinโ€™s attention clearly turned to his post-Treasury plans. Any restructuring, to be successful, would have offended somebody. We did not get it done because Mnuchin did not want to upset anyone on his way out the door, including incoming Treasury secretary Janet Yellen.โ€

This is just Calabriaโ€™s side of the story. The more complete version is that he and Mnuchin had different objectives for the restructuring of Fannie and Freddie that they were unable or unwilling to reconcile. More problematically, both of their objectives were based on fictions about the companies, not facts, and the institutional investors whose participation was essential for the recapitalization of Fannie and Freddie knew this. Mnuchin seemingly wanted Treasury to be repaid twice for 2008 โ€œrescuesโ€ the companies did not request and did not need, while Calabria was insisting on โ€œhardwiringโ€ the entirely arbitrary 80 percent increase in required capital he had imposed on Fannie and Freddie in December of 2020, creating a severe handicap for their business. The investment community was being asked to bear the cost of both of these non-economic objectives, which was unreasonable to expect it to be willing to do.

During the Biden administration, Treasury Secretary Yellen and FHFA Director Thompson showed no interest in addressing Fannie and Freddieโ€™s conservatorships. Yellen simply was silent on the matter, while Thompson repeatedly said she would defer to Congress to solve the problem through some unspecified type of legislative โ€œreform.โ€ But the companies have been reformed. They no longer are allowed to hold mortgages in portfolioโ€”which had been the main objection to them prior to the conservatorshipsโ€”and along with primary lenders are subject to the โ€œability to repayโ€ provision of the 2010 Dodd-Frank Act that prohibits the toxic loan types and lending practices that triggered the 2008 financial crisis. Moreover, Fannie and Freddieโ€™s entity-based business modelโ€”in which revenues on good loans from all years, regions and loan types are available to cover losses on any loans that go badโ€”is already far superior to the senior-subordinated model used in private-label securitizations (PLS). In the PLS model, each pool must stand on its own, and the inability to reach beyond it for revenues, or add capital post-securitization, requires substantial initial subordination, which translates into much higher credit guaranty costs and still leaves the holders of the senior tranches exposed to any losses that exceed the fixed loss-absorbing capacity of the subordinated tranches. Fannie and Freddieโ€™s credit guaranty model is the gold standard.

So now, the second Trump administration is inheriting two companies that together finance 48 percent of the $14.1 trillion of single-family mortgages in America, have been extremely profitable for the last dozen years and need no further reform, yet because of policy choices made during previous administrations remain mired in conservatorships that would take them almost 15 years to emerge from on their own, during which their current degree of overcapitalization would continue to prevent them from providing affordable mortgage financing to the low- moderate- and middle-income families they were chartered to serve.

Are there any reasons to believe that the new Secretary-designate of the Treasury, Scott Bessent, might have better luck in โ€œgetting them out of government controlโ€ than Steven Mnuchin did? In fact, there are, because of all of the changes in Fannie and Freddieโ€™s circumstances and condition that have occurred over the past eight years.

Perhaps most significantly, at the end of 2016 Treasury still was institutionally committed to โ€œwinding down and replacingโ€ Fannie and Freddie legislatively, as it had been since before Secretary Paulson put them into conservatorship. This goal was driving Treasuryโ€™s policies toward the companies, as memorialized in a December 12, 2011 Draft Internal Memorandum for Treasury Secretary Geithner, containing โ€œa plan with FHFA to transition the GSEs from their current business model of direct guarantor to a model more aligned with our longer-term vision of housing finance.โ€ Components of this plan included guaranty fee increases that would continue โ€œuntil pricing reaches levels that are consistent with those charged by private financial institutions with Basel III capital standardsโ€ (irrespective of risk), a single securitization platform for Fannie and Freddie (which could be used by their successors or competitors), securitized sharing of credit risk (which the memo said โ€œwould likely reduce the earnings capacity of the GSEsโ€), and โ€œfaster retained portfolio wind down.โ€ All of these were done. This same memo also contained a proposal to โ€œRestructure the calculation of Treasuryโ€™s dividend payments from a fixed 10 percent annual rate to a variable payment based on available net worth (i.e., establish an income sweep).โ€ That, of course, was done as well, eight months later, and it became known as the net worth sweep.

But after the November 2018 midterms, which moved the House of Representatives under Democratic control, virtually the entire financial community, along with Treasury, gave up on the idea of trying to replace Fannie and Freddie. Numerous effortsโ€”including the first Corker-Warner bill in 2013, Johnson-Crapo in 2014, and what was called โ€œCorker-Warner 2.0โ€ early in 2018โ€”all had flaws that prevented them from generating any momentum, and a divided Congress was the final blow to the aspirational notion that it might be possible to create a viable alternative to Fannie and Freddie legislatively. Removal of the companies from conservatorship would need to be done by administrative action. And here is where the problem arose. As I wrote in a January 2020 post titled How We Got to Where We Are, โ€œthe fictions about Fannie and Freddie that were essential elements of the attempt to replace the companies in a legislative process become impediments when the goal is to successfully recapitalize and release them in an administrative process.โ€

In his book, On the Brink, Secretary Paulson falsely says,โ€œFannie and Freddie were the most egregious example of flawed policies that inflated the housing bubble and set off the financial crisis.โ€ Throughout the first ten years of the companiesโ€™ conservatorships, that was the version of them repeated by the financial mediaโ€”and Treasuryโ€”and the $187 billion in Treasury senior preferred stock Fannie and Freddie had drawn between 2008 and 2011 was universally viewed as the cost to taxpayers of their profligacy. Very few knew the true story, until more than two dozen shareholder suits were filed against the net worth sweep, beginning with Perry Capital v. Treasury and FHFA in July of 2013.

The amicus curiae brief I submitted for Perry Capital in July of 2015 summarized the facts that were coming to light in these cases. I noted that both Fannie and Freddie had been in compliance with their capital requirements when Paulson asked their boards to acquiesce to his conservatorship request, and that more than all of their $187 billion in senior preferred stock (which Treasury had made repayable only with its permission) was the result of over $300 billion in noncash expenses booked by FHFA as conservator that either were temporary, advanced from future periods, or based on estimates. And I pointed out that Treasury and FHFA had imposed the net worth sweep just before the majority of those noncash expenses reversed and came back into income ($158 billion in 18 months), so that the resulting revenues went to Treasury, rather than enabling Fannie and Freddie to rebuild their capital. (For those interested in the full set of facts about the conservatorships and the net worth sweep, I recommend my Supreme Court amicus written for Collins v. Yellen.)

In July 2017, the judge in another case against the net worth sweep, Fairholme Funds v. The United States, in the Court of Federal Claims, released 33 documents produced in discovery that made clear that Treasury was not being truthful in its public explanation for the sweep, which was that it was done to save the companies from a โ€œdeath spiralโ€ of borrowing to pay the dividends on their senior preferred. Not only did these documents reveal that Treasury and FHFA were fully aware that Fannie and Freddie were about to enter โ€œgolden years of earningsโ€ just as the sweep was being imposed, there also were memos among Treasury staff making blatant admissions such as, โ€œBy taking all of their profits going forward, we are making clear that the GSEs will not ever be allowed to return to profitable entities at the center of our housing finance systemโ€ [emphasis in original]. Finally, and more recently, in August 2023, a jury hearing a remand of Perry Capital (now Fairholme Funds v. FHFA) in the U. S. District Court for the District of Columbia found that FHFA โ€œwrongly amendedโ€ the Senior Preferred Stock Purchase Agreements when it agreed with Treasury to impose the net worth sweep, and awarded plaintiffs damages plus interest totaling $831 million to date (to be paid by the companies, which have accrued their respective portions).

As a hedge fund manager, Treasury Secretary-designate Bessent should be aware of the plaintiffsโ€™ (correct) version of the Fannie and Freddie story, and if he is not there will be people with whom he is close who can tell him. Knowing the facts should make Bessent more likely to concede that Treasuryโ€™s $193.4 billion in senior preferred stock in the companies is fully repaid (as it has been), and to agree that it should be cancelled, along with Treasuryโ€™s liquidation preference ($341.0 billion at December 31, 2024, and growing each quarter). Yet should he insist that payments made to Treasury under the net worth sweep are not repayments of the senior preferredโ€”and that the companies should pay Treasury again by having its senior preferred converted to common stockโ€”he at least will be cognizant that this stance will make the recapitalization of Fannie and Freddie much more challenging, because their investors will know that they are not being treated fairly.

Deeming Fannie and Freddieโ€™s senior preferred to have been repaid, and cancelling it and the liquidation preference, will put the companies firmly on the path towards release. But to get to that release point more quicklyโ€”and to deliver on the Trump campaignโ€™s pledge to reduce the cost of homeownership for ordinary Americansโ€”Treasury and FHFA also must undo the damage to Fannie and Freddieโ€™s credit guaranty business caused by the punitive and unjustified Enterprise Regulatory Capital Framework (ERCF) imposed by former FHFA Director Calabria. New information about Fannie and Freddieโ€™s risk, and the โ€œCalabria capital standard,โ€ also has become available over the past eight years, and that should make tackling and resolving this issue easier for Bessent than it proved to have been for Mnuchin.

Most important is Fannie and Freddieโ€™s continued improvement in their annual Dodd-Frank stress tests. In the last test made available before Mnuchin was appointed Secretary, Fannie required initial capital of 79 basis points to survive a stylized 25 percent decline in home prices, while Freddie required 156 basis points. For the test run in 2020, when Calabria put out his ERCF for comment, Fannie required no capital to survive a 28 percent drop in home prices, while Freddie required 31 basis points. Since then, neither company has required any initial capital to survive their Dodd-Frank stress tests in 2021, 2022, or 2023, and the 2023 test subjected them to a 38 percent decline in home prices. (Curiously, FHFA delayed releasing the results of the 2024 stress tests beyond its August 15 deadline, โ€œso that the Enterprises may provide additional supporting information and analysis of the scenarios, that the Director of FHFA may deem necessary,โ€ but since the 36 percent home price drop in the 2024 test was slightly less than in 2023, itโ€™s safe to assume the companies required no initial capital to pass the 2024 test either.) In sharp contrast, the average risk-based capital requirement for Fannie and Freddie of the Calabria standardโ€”purportedly calibrated to a lesser degree of stress than the Dodd-Frank testโ€”was 4.27 percent at September 30, 2024.

Why is the Calabria capital requirement so much higher? Because itโ€™s purely arbitrary, and not based on risk at all. Rather than create a true risk-based capital requirement for Fannie and Freddie and then set a minimum capital requirement that was lower, Calabria did the opposite. He began by setting a โ€œbank-likeโ€ minimum capital requirement of 4.0 percent for the companies (despite the fact that they have no business in common with banks), then used three contrivancesโ€”not considering guaranty fees in the risk-based capital stress test as absorbing credit losses, artificially increasing capital on all loans though add-ons, buffers and cushions, and subjecting low-risk loans to a minimum risk weightโ€”to engineer a result for the required amount of Fannie and Freddieโ€™s โ€œrisk-basedโ€ capital that was greater than his arbitrary minimum of 4.0 percent. (A much more comprehensive discussion of this topic can be found in the September 2021 post Capital Fact and Fiction.)

The impact of this gross overcapitalization has been severe. Fannie has been most affected by it, because the ERCF imposes a graduated capital surcharge for financing more than 5 percent of outstanding single-family mortgages (a โ€œstability capital bufferโ€), and Fannie is larger. Since the ERCF took effect in the first quarter of 2022, its stability capital buffer has averaged 30 basis points more than Freddieโ€™s (at September 30, 2024 it was 111 basis points of Fannieโ€™s total assets).

A comparison of selected financial data for Fannie between the five years before the ERCF took effect (2017-2021) and after is telling. In the five years prior to the ERCF, Fannieโ€™s guaranty fee on new single-family business averaged 46.5 basis points (not including the 10 basis points it has to charge and remit to Treasury); because of the ERCF that average fee has steadily risen to 54.1 basis points in the third quarter of 2024. We saw in the mid-2010s that when Fannieโ€™s average guaranty fee on new business exceeded 50 basis points, the growth in its single-family business stalled out. The same is happening now. After growing by 3.0 percent in 2022, Fannieโ€™s single-family book shrunk slightly (by 0.1 percent) in 2023, and it has continued to shrink in the first three quarters of this year. As a consequence, while Fannie financed 27.8 percent of outstanding single-family mortgages at December 31, 2021, it financed just 26.1 percent as of June 30 this year (the latest date for which totals on outstanding single-family mortgages are available).

The impact of Fannieโ€™s pricing also is evident in securitization shares. During 2017-2021, Fannie issued an average 39 percent of all new single-family MBS; Freddie and Ginnie Mae each issued 29 percent, and the other 3 percent were issues of PLS. But in the third quarter of 2024 Ginnie Mae was the leading issuer of single-family MBS, at 37 percent; Freddie was second at 28 percent, Fannie third at 27 percent, and the PLS share had risen to 8 percent.

Less evident, but more dramatic, has been the sharp drop in Fannieโ€™s credit guarantees to borrowers with less-than-perfect credit (who typically have lower incomes). Here the relevant base of comparison is pre-conservatorship, and the last five years when Fannie had a โ€œnormalโ€ profile of new business acquisitionsโ€”before underwriting standards were distorted by originations destined for private-label securitizationโ€”which was 2000-2004 (also my last five years as Fannieโ€™s CFO). During that period, the average credit score of all single-family loans Fannie purchased or guaranteed was 715, and 36 percent of its business had a credit score under 700. By comparison, during the first nine months of 2024 Fannieโ€™s average credit score on new business was 759, and a mere 10 percent of that business had a credit score under 700. That is a plunge of over 70 percent in what are predominately affordable housing loans. This, too, is the result of pricing, particularly the feature of the ERCF that does not consider guaranty fees to absorb losses. Because of that, the credit โ€œrisk weightโ€ of a loan with a 90 percent loan-to value ratio and a credit score of 660 results in required capital of 945 basis points. And when you add in the additional percentages for management and operations risk, and the stress and stability capital buffers, Fannieโ€™s total required capital on a 90 LTV, 660 credit score loan is 11.50 percent, requiring the company to charge a guaranty fee of 125 basis points to earn a return on capital comparable to what itโ€™s earned on its average credit guaranty portfolio so far in 2024. Thatโ€™s preposterous.

None of these trends are going to improve as long as the ERCF remains in effect. And what has been happening with Fannie also is reflected in national housing trends. Earlier this month the Washington Post published an article that reported, โ€œBetween July 2023 and June 2024 the share of first-time home buyers in the market was only 24 percent โ€” a historic low.โ€ It also said, โ€œThe share of home buyers paying all cash reached 33 percent through August this year, according to data from Redfin โ€” one of the highest rates since the years following the Great Recession,โ€ and added, โ€œAs cash purchases have become more common, the median age of home buyersโ€ฆnow stands at 56 years old,โ€ compared with 39 years old in 2008 (when Fannie and Freddie were put into conservatorship). The high all-cash share of homebuyers, and their increased average age, are flip sides of mortgage costs that are unaffordable to younger potential homebuyers with decent but not great credit. This is a real problem, and getting Fannie and Freddie out of conservatorship with capital requirements based on economics rather than ideology would be a real solution, which the second Trump administration could take credit for.

What prevented Treasury Secretary Mnuchin and FHFA Director Calabria from delivering on Mnuchinโ€™s November 2016 pledge to get Fannie and Freddie out of government control was the inability of the former to get comfortable with ending (not just suspending) the net worth sweep and eliminating Treasuryโ€™s senior preferred stock and liquidation preference in the companies, and the intransigence of the latter in making the release process much more difficult by insisting on nearly doubling their capital requirements at the same time as their credit risks were falling and their revenues soaring (as reflected in the results of their Dodd-Frank stress tests). The lessons from this failure, plus a fresh face at Treasury, should ensure that these mistakes arenโ€™t repeated in โ€œRelease 2.0.โ€

Something else that wonโ€™t happen with Bessent as Treasury Secretary is โ€œprivatizationโ€ as defined by the Heritage Foundation in Project 2025. For most people, privatization means the return of Fannie and Freddie to shareholder ownership. But the Heritage Foundationโ€™s definition of privatization is stripping Fannie and Freddie of all of the federal attributes in their charters, while leaving their business restrictions intact. The companies would not survive in that state, as the Heritage Foundation implicitly admits with its recommendation that, โ€œFannie Mae and Freddie Mac (both GSEs) must be wound down in an orderly manner [and] the Common Securitization Platform should be privatized and broadly available.โ€ In other words, run off $7.3 trillion in Fannie and Freddieโ€™s single- and multifamily mortgages and hope they can be re-issued as private-label securities. That is a disastrous prescription by academic theoreticians with no market experience, and Bessent will treat it as such.

More likely, in my view, would be for Bessent to arrive at a strategy for the release of Fannie and Freddie through an analytical process similar to what I outlined in my September 2023 post, An Easy Way Out:

โ€œAs Treasury evaluates ending the net worth sweep and allowing Fannie and Freddie to exit conservatorship, it will need to determine which of its claims on them [its senior preferred, liquidation preference, and warrants] have the most value. And that will not be hard. To get value out of its $120.8 billion of senior preferred stock in Fannie and $72.6 billion of senior preferred in Freddie, Treasury will have to convert them into each companyโ€™s common stock. Yet the very act of doing so will reinforce investorsโ€™ strong views of unfair treatment. They know Fannie and Freddie have repaid their senior preferred, with dividends; itโ€™s just that Treasury has used its non-repayment provision as a reason not to count net worth sweep remittances as repayments. Treasuryโ€™s insisting that its senior preferred be converted to common would be requiring the companies to repay their senior preferred twice. If it does, how many investors would choose to buy Fannie or Freddie common stock againโ€”including the stock Treasury would need to sell to get value from converting its senior preferredโ€”and how much would they be willing to pay for it?

Now consider the alternative: making Treasuryโ€™s warrants for 79.9 percent of Fannie and Freddieโ€™s existing common stock more valuable by making the companies more valuable. Here, Treasury would work with FHFA and the administrationโ€™s senior economic team to negotiate a recapitalization and release agreement that includes retroactive cancellation of the non-repayment provision of the senior preferred and a recasting of the companiesโ€™ remittances under the net worth sweep as repayments of the senior preferred stock (which would pay all of it off for both). Fannie and Freddie, in return, would agree to accept utility-like return targets on their credit guaranty business, benefitting homebuyers. Then, for its part, the administration would acknowledge the criticisms made by commenters on FHFAโ€™s request for input on Fannie and Freddieโ€™s capital and pricing, and strongly encourage (or require) FHFA to remove the excess and unwarranted conservatism in the ERCF, to have it more closely reflect the true risks of Fannie and Freddieโ€™s business.โ€

An Easy Way Out also suggests a โ€œquick fixโ€ to the ERCF that would not require a full re-working of the rule immediately: โ€œto drop the โ€˜prescribed leverage bufferโ€™ Calabria added to the 2.5 percent minimum capital requirement FHFA set for the companies in its 2018 capital standard, and then remove enough of the non-risk-based minimums and buffers in the ERCFโ€™s risk-based component to reduce it to below the 2.5 percent minimum, which would become the companiesโ€™ binding capital requirement for the foreseeable future.โ€ In conjunction with that, of course, Treasury and FHFA would cancel or replace the January 14, 2021 letter agreement between Mnuchin and Calabria setting 3.0 percent CET1 capital as the threshold for ending the companiesโ€™ conservatorships.

Deeming Fannie and Freddieโ€™s senior preferred to have been repaid and canceling the net worth sweep and the liquidation preference, and giving the companies a true risk-based capital standard and a reasonable minimum capital percentage, would be a โ€œwinโ€ for all parties. The biggest winners would be the millions of low- and moderate-income Americans who once again would have a large-scale source of low-cost mortgage credit to help them achieve their dream of homeownership. But not far behind would be Treasury, whose stakes in Fannie and Freddie would become a great deal more valuable were the companies to be treated fairly, returned to private management, and structured to succeed.

Older posts
Search for:
Search โ€ฆ



Recent Posts
Release 2.0
The MBS Vigilantes
The CRT Charade
An Easy Way Out
Response to FHFA Pricing RFI
Recent Comments
ruleoflawguy on Release 2.0
jtimothyhoward on Release 2.0
qishhuang on Release 2.0
cavalluk on Release 2.0
G. Buckman on Release 2.0
Top Posts
An Easy Way Out
A Political Problem
An Unexpected Ruling
A Pattern of Deception
Capital Fact and Fiction
Some Simple Facts
Reference Documents
Response to FHFA Pricing RFI
Comment on ERCF Rule Amendments
A Six-Year Retrospective
Comment on FHFA Capital Re-proposal
A Three-Year Retrospective
Comment on FHFA Capital Proposal
Response to FHFA on Credit Risk Transfers
Fixing What Works
Thoughts on Delaware Amicus Curiae Brief
Argument from Perry Capital Amicus Curiae brief
Treasury, the Conservatorships, and Mortgage Reform
FHFA guaranty fee questions
Archives
December 2024
July 2024
January 2024
September 2023
June 2023
January 2023
August 2022
May 2022
February 2022
October 2021
September 2021
June 2021
May 2021
January 2021
October 2020
July 2020
May 2020
January 2020
October 2019
September 2019
June 2019
April 2019
February 2019
December 2018
September 2018
July 2018
May 2018
March 2018
February 2018
November 2017
September 2017
July 2017
June 2017
April 2017
March 2017
February 2017
January 2017
December 2016
November 2016
October 2016
September 2016
August 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
September 2015
July 2015
January 2015
July 2014
Howard's Links
"The Mortgage Wars" โ€“ available on Amazon "The Mortgage Wars" โ€“ available on Amazon
Howard book talk โ€“ Politics and Prose video
Follow Blog via Email
Enter your email address to follow this blog and receive notifications of new posts by email.

Email Address:
Email Address

Follow


Blog at WordPress.com.
Response to FHFA Pricing RFI Comment on ERCF Rule Amendments A Six-Year Retrospective Comment on FHFA Capital Re-proposal A Three-Year Retrospective Comment on FHFA Capital Proposal Response to FHFA on Credit Risk Transfers Fixing What Works Thoughts on Delaware Amicus Curiae Brief Argument from Perry Capital Amicus Curiae brief Treasury, the Conservatorships, and Mortgage Reform FHFA guaranty fee questions
๐Ÿ‘๏ธ0
JSmith5 JSmith5 24 minutes ago
No, this is false. FnF did NOT buy toxic mortgages after conservatorship started

That's fine - I can live with that. I like Tim Howard's latest blog which he posted today.

Nats
👍️ 1
MRJ25 MRJ25 40 minutes ago
It shure was a wild finish today. Wazzup?
👍️ 1 🤐 1
ron_66271 ron_66271 1 hour ago
The Whales Have Been Filed.

That is why we had the second dip as buying stopped temporarily.



Ron
👍️ 1
skeptic7 skeptic7 1 hour ago
My next question would have been:
"Cool. Why didn't you do it then?"
#crickets.
๐Ÿ‘๏ธ0
Viking61 Viking61 2 hours ago
Itโ€™s time for Freddie to blow the top off of this thing!! More earnings per share than Fannie, half the shares outstanding and the Freddie commons are included in the Lamberth shareholders 8-0 jury victory!! GLTA!!!
👍️ 4 💯 1 🤑 1
Viking61 Viking61 2 hours ago
Lamberth, anyone??
👍️ 1
mrfence mrfence 2 hours ago
If FHFA director pick announcement is being timed for maximum influence, Tuesday morning is the dead center target.
👍️ 4
Kimbrown Kimbrown 2 hours ago
It is not $3.5, it will be $35.
👍️ 4 💥 1 ❤️ 3
Viking61 Viking61 2 hours ago
If weโ€™re looking at a V shaped recovery, tomorrow could be a huge day!!! That graph is picture perfect!!
👍️ 2
mrfence mrfence 2 hours ago
Name them Tweek.
๐Ÿ‘๏ธ0
Dabeav Dabeav 2 hours ago
Post market has them up.
👍️ 1 🙄 1
JOoa0ky JOoa0ky 2 hours ago
Not going to happen. $3.50 wall is in place.
๐Ÿ‘๏ธ0
Clark6290 Clark6290 2 hours ago
Level II would be great if my internet worked. I certainly wouldn't sit and watch it all day though
๐Ÿ‘๏ธ0
Guido2 Guido2 2 hours ago
https://x.com/GuidoPerei/status/1866221053049258213
👍️ 3 💯 1
Kimbrown Kimbrown 2 hours ago
Stop the gimmick of dumping and pumping. Shareholders are long term, who will not follow you. Get the FNMA and FMCC to $8. They will be around $25-35 at release.
👍️ 4 🤬 1
trunkmonk trunkmonk 2 hours ago
seems the How Not To Crew shows up everyday and says rule of law means nothing, this all started after they completely failed in SCOTUS with their Laser focus greed. Us GSE shareholders appreciate anyone who believes in Rule of Law. maybe MC can do another 180 and push for exit, without all the illegal dilution.
👍️ 1
navycmdr navycmdr 2 hours ago
Level II acting crazy -

Freddie sometime higher than Fannie

Rollercoaster ride that is finishing up strong ...
👍️ 2 🖐️ 1 🚬 1
mrfence mrfence 2 hours ago
How much Meth are you on right now?
👍️ 1 😂 1 🙉 1 🫨 1
mrfence mrfence 2 hours ago
.
๐Ÿ‘๏ธ0
PennMilitia PennMilitia 2 hours ago
kthomp19 works for the GOVT
👍️ 2 💯 2
mrfence mrfence 2 hours ago
Ooops, upside your head

๐Ÿ‘๏ธ0
kthomp19 kthomp19 2 hours ago
No one is going to buy a company that can be nationalized at the drop of a hat to be forced to buy shitty loans from every other bagholder holding toxic mortgages.

The fact that all of the outstanding common shares are currently owned by someone proves this wrong.

If new investors would be stupid to buy post-dilution common shares, whoever owns common shares right now is even more stupid.

If not no one will give a fuck about buying like right this moment.

You own common shares yourself, proving this statement wrong too.

There is likely more institutional interest in preferred though based on price action.

I agree.
๐Ÿ‘๏ธ0
kthomp19 kthomp19 2 hours ago
New capital isnโ€™t going to take the risk of this happening again if they see previous shareholders hosed a final time after 16 years.

You mean new investors are going to look at the following:

1) strong-arming the BODs into consenting to conservatorship
2) extremely punitive terms in the original SPSPAs
3) the freaking NWS
4) defending every shareholder-brought lawsuit tooth and nail
5) liquidation preference ratchet in the last few letter agreements

and be okay with putting their money in, but a senior-to-common exchange would be the final straw? That makes no sense whatsoever.

If new investors won't ever buy newly-issued common shares due to past government mistreatment, then FnF will be stuck in conservatorship forever because Treasury will have no incentive to let them out.

And if new investors will buy, a senior-to-common exchange won't faze them.

But if they treat current holders fair and shareholders whoop it up a little it would create a far better investing environment and elicit more interest than if we all are screaming this is fing BS.

The more money that legacy common holders get, the less money new investors get. The pie is fixed. Why would new investors give away money to legacy common when they don't have to?
๐Ÿ‘๏ธ0
kthomp19 kthomp19 2 hours ago
Howard is about to lose his shirt thinking that commons need to be treated fairly for outside capital to invest...

Not personally. He sold his common shares a long time ago.

Still, he's wrong on that count and others who do own legacy commons and agree with his flawed thinking are certainly at risk of losing substantial amounts.

These two parties' interests are literally on opposite sides of the negotiating table.

That's the huge flaw in Ackman's thesis. He wants Treasury to exercise the warrants because in his mind it would align Treasury's interests with legacy common holders'. A senior-to-common exchange inverts that and gives Treasury a reason to grab as much of the pie as they can, thus leaving as little as possible behind for legacy common.

The fact that Ackman wants the warrants exercised also illustrates the backward thinking of some common shareholders, the ones who take Ackman's outdated $23-47 price target from 10 years ago and then argue that the warrants should be cancelled rather than exercised, leading to a higher common share price. They start with a high share price and start arguing for the steps it would take to get there, rather than looking at FHFA and Treasury's actual incentives first and estimating a share price from there.
๐Ÿ‘๏ธ0
kthomp19 kthomp19 2 hours ago
Barron & Co don't actually believe in what they claim... otherwise the lawsuit would've been filed already since it's a slam dunk.

Exactly right. Inactions speak louder than words.
๐Ÿ‘๏ธ0
kthomp19 kthomp19 2 hours ago
I've been thinking about the Lawyers and why they didn't pursue a Takings Suit because I've been saying that we should be doing just that for over a decade.

Have you been paying attention at all?! There were a whole bunch of takings cases. They all got dismissed, unfortunately.

Therefore, if we won a Takings suit, we win a few bucks and da Gooberment keeps the Twins.

That's what would have happened if the plaintiffs had won the NWS takings cases anyway.

So the bottom line is, we really want our Twins back.

FnF being recapitalized and released from conservatorship is not at all the same as current common shareholders making a bunch of money. There are many paths to recap/release that leave the existing common worth $5 or less on a reverse split adjusted basis.
๐Ÿ‘๏ธ0
kthomp19 kthomp19 2 hours ago
For sure. I was expecting our case in the SC to be decided in our favor by 6-3. Silly me - I was looking at, like, the merits of our case.

Same here.

What I can't wrap my mind around is the idea that the same court system that upheld the NWS would somehow be swayed by minor arguments like "the commitment fee in the SPSPAs violates FnF's charters".

My biggest takeaway from the Supreme Court's Collins ruling was that Treasury will not be forced into any resolution of the senior prefs and NWS by the courts. It will have to be voluntary on Treasury's part.
๐Ÿ‘๏ธ0
kthomp19 kthomp19 2 hours ago
Exactly. Regardless of what they say, to save the banking system, they treated the GSEs as a financial trash can.

No, this is false. FnF did NOT buy toxic mortgages after conservatorship started. Tim Howard looked at their books of business and found that the late 2008 and 2009 books of business were of high quality, similar to 2003-2004, which totally debunks the "FnF were forced by FHFA to buy toxic mortgages" myth.
๐Ÿ‘๏ธ0
kthomp19 kthomp19 2 hours ago
Thatโ€™s an idea, Kthomp19 if a district court overturned the C-Ship you make tons more money.

And if I bought a winning Powerball ticket I would make even more than that.

Don't think in possibilities, think in probabilities. I think that the chances that a court overturns the conservatorships are close enough to zero that it isn't worth considering. The Supreme Court refused to uphold the Fifth Circuit en banc panel's overturning of the NWS and did uphold the CAFC's dismissal of all the NWS takings cases. I have no faith whatsoever in any large-scale court victory.

I consider the implied covenant case to be small-scale because the award was well less than $1B, it hold no precedential power at all, and Treasury was not a defendant.

The issues needed to understand now are the tough sneaky lawyer stuff. What is illegal exaction? What does sounding in tort mean? Can a derivative claim be heard under the little tucker act? Goal is to understand the actual limitations that can trip up any claim and head it off so that the claim canโ€™t be dismissed on procedural grounds.

You don't know what these things are and yet you have the gall to claim "THE PLAINTIFFS BROUGHT THE WRONG LAWSUIT"? That's hilarious.

Have you ever considered the idea that the plaintiffs actually brought the right lawsuits and just lost anyway?
๐Ÿ‘๏ธ0
kthomp19 kthomp19 2 hours ago
Not an all-talk do-nothing hypocrite!!!! Please don't expose me.

Either show me your court filing or stop talking about supposed illegalities, like the commitment fee, and I will withdraw my accusation.

Your hypocrisy is already on display for all to see. You constantly talk about government wrongdoing but have yet to get off your ass and do something about it. All I'm doing is pointing it out.

I would love for you to join me and help me with a lawsuit. Why not?

To be blunt, it's because I don't think your lawsuit has any chance of succeeding. Any time and/or money spent on it will be wasted.

You are quickly running out of time, by the way. If a senior-to-common cramdown really does occur it will be nigh impossible to undo the dilution. FHFA is protected from injunctive relief by 4617(f), and any takings or illegal exaction suit against Treasury can only result in money damages being paid, not undoing the dilution.

Unless you have a vested interest and prefer to see the gov cramdown

I don't want a senior-to-common cramdown to happen. I expect it to. That's why I have positioned myself in the junior prefs instead of the commons, so that such a cramdown doesn't hurt me nearly as much.

and dilution of us poor retail investors.

Oh come off it already. You will get no sympathy from FHFA or Treasury when they execute their plan.

If you bought your shares after the conservatorships, and especially after the NWS, you do not have the moral high ground.
๐Ÿ‘๏ธ0
kthomp19 kthomp19 2 hours ago
Toxic or not Fannie and Freddie were the engine used to bailout the banks.

More sensationalist nonsense with no evidence behind it. The "evidence" you list doesn't have anything to do with this statement. The first piece only talks about the Fed engaging in a bailout, and the second only said there was a "plan". Tim Howard found that that "plan" never materialized when he looked at the numbers: FnF's book of business was of high quality just after they went into conservatorship, comparable to 2003-2004 rather than 2006-2007.

If the insinuation was that FnF were put into conservatorship for the purpose of facilitating this bailout, it falls flat. FnF had made a lot of political enemies via their aggressive lobbying and that was their undoing more than anything else.

Fannie and Freddie did not meet any of the 12 requirements passed by the newly passed HERA legislation justifying conservatorship.

Wrong. The boards consented to conservatorship, fulfilling the ninth condition: 12 USC 4617(a)(3)(I).

If you're going to bring up the tired old talk about the boards being coerced into consenting, three things:

1) One of the court cases (Washington Federal) already alleged this and the entire case was dismissed
2) Hank Paulson admitted as much in his book On the Brink, and yet that didn't help in the Washington Federal case
3) No currently outstanding lawsuit alleges this

Funnily enough, my first signature line does not apply to the "FnF's boards were coerced into consenting to conservatorship" argument because it was brought in a lawsuit and still failed.
๐Ÿ‘๏ธ0
navycmdr navycmdr 2 hours ago
Releasing Fannie/Freddie from Conservatorship is

FOLLOWING the LAW !

- coming from the GUY who helped WRITE the LAW !



👍️ 4
ron_66271 ron_66271 3 hours ago
Filing Whales.
👍️ 1
mrfence mrfence 3 hours ago
Now THAT'S what's LAUGHABLE Click Clack. Warrants are for Bankruptcy/Receivership. So NOT happening 😅🤣😂
😘 1
Viking61 Viking61 3 hours ago
Waiting for Calabria to apologize to all shareholders!
👍️ 1
Viking61 Viking61 3 hours ago
Waiting for Calabria to apologize to all shareholders!
👍️ 2 🤣 1
Clark6290 Clark6290 3 hours ago
Bobo Amigo, perhaps you are unaware the government owns 80%. Massive dilution if ever released
๐Ÿ‘๏ธ0
Aunt Jemima Aunt Jemima 3 hours ago
You are down more than Linda Lovelace and Joe Frazier put together
👍️ 1
Wingsjr Wingsjr 3 hours ago
There will never be any new commons, there will only be more current commons in worse case scenario. You can only wipeout current commons by bankruptcy or receivership, which would be political suicide when the National Debt spikes 7+ Trillion as soon as the pen is pressed to paper. Not to mention the 10-15 year class action lawsuit that will halt everything.
👍️ 1
skeptic7 skeptic7 3 hours ago
I thought pre NEW interest payments were just that, because post NWS there was no longer "interest". It's a scam either way.
๐Ÿ‘๏ธ0
nagoya1 nagoya1 3 hours ago
Catman can start licking himself and munchkin before he has anything to do with the GSEs. Fnma
👍️ 2
skeptic7 skeptic7 3 hours ago
Yeah! How dare you question his intent for the GSE's by putting unrealistic and inexplicable capital retention limits on them to ensure they remained in c-ship for a decade longer than necessary if he hadn't. Calabria is great!
๐Ÿ‘๏ธ0
blownaccount9 blownaccount9 3 hours ago
No one is going to buy a company that can be nationalized at the drop of a hat to be forced to buy shitty loans from every other bagholder holding toxic mortgages. There will have to be concessions from the government to show some good faith to validate their future existence. If not no one will give a fuck about buying like right this moment. Almost no one cares because they donโ€™t see a light at the end of the tunnel after this problem has carried on for 16 years. Between the 2 there are $30 billion in preferred shares meaning there was a lot of bag holders when this happened in 2008, in 2014 when Ackman and Co. tried to force them out of conservatorship with threats of lawsuits, and again when trump was elected in 2016. No one aside from retail investors had any interest up until now and even now the boutique funds are pretty small as price hasnโ€™t exactly rocketed up for commons. There is likely more institutional interest in preferred though based on price action.
👍️ 3
mrfence mrfence 3 hours ago
Whaaa 👶WhaaaA 👨‍🍼 WHAAAAA!
👍️ 1
pauljon4 pauljon4 3 hours ago
If you love waiting, you have come to the right place.
👍️ 2 😆 1
mrfence mrfence 3 hours ago
MM's quietly 🤫 covering the Naked Shorts they created @ the $3.50 wall. It's their job to tame volatile trading.
👍️ 1 🤪 1
FFFacts FFFacts 3 hours ago
Waiting for all you scumbags to apologize to Calabria.
💤 1 🙄 1
pauljon4 pauljon4 4 hours ago
New shareholders will not give one squirt of piss about our losses, unless those with millions of shares, bring further lawsuits. Just being real.
๐Ÿ‘๏ธ0
Guido2 Guido2 4 hours ago
Transfer between related entities?
👍️ 1