Fannie Mae Preferred S (FNMAS)

[rosen62]

New Capuano bill.

It converts the Sr. preferred shares commitment into a series of loans with originations dated when each borrowing occurred. This is similar to the original bill, if not the same. Then, applies dividends paid to principal and interest of each of the loans until repaid. The deferred tax assets would cancel the majority of the loans from the first few years so the balances left will be small and will spread over 30 years at a 5%.

In an extreme scenario, had the 187 bill been loaned once at the beginning in 2008 the final amount to be paid over 30 y at 5% would have been around 360 bill. However, his bill just like the original, allows for repayment in full of any of the loans as per the amount of dividends already paid. So cancellations of loans accelerate after the first DTA activation. Given this scenario, huge cancellations in 2013 and 2014, we are only seeing very few years of 5% interest on large loan balances. While the remaining balance will be fairly small and allow the companies to rebuild their own capital each and every quarter as there may be enough of an excess capital.

The good thing is that the new bill does not discriminate dividends. So DTAs and settlements all fall within the same pool.