Freddie Mac (FMCC)

[hughes16]

Bill Ackman's thesis for Freddie and Fannie

Great summary of Bill Ackman's letter

Fannie Mae / Freddie Mac

Underlying earnings in their core mortgage guarantee businesses declined modestly in the first quarter, reflecting lower refinancing volumes driven by a large increase in interest rates in the 4Q16
Believe long-term earnings power will continue to grow due to 3 factors:
An increase in guarantee fees as the fees on new mortgages exceed the average fees on the existing portfolio
Growth of the total guarantee portfolio along with mortgage originations
Lower credit losses as portfolio’s credit quality continues to improve
Housing finance reform is a top priority for both the new administration and Congress
Key constituents including Steven Mnuchin have a thorough understanding of the critical role that Fannie and Freddie play in the health of the nation’s housing finance system
In contrast to vintage 2013 proposals that sought to replace Fannie and Freddie or wind them down, several proposals released over the last month, most recently a white paper from the Independent Community Bankers of America, recognize that preserving a reformed and restructured Fannie and Freddie is the only way to ensure the continued health of the secondary mortgage market, especially for a large number of community banks that are critical sources of financing for many homeowners