Fannie Mae (FNMA)

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If Rep. Hensarling Gets His Way, GSE Shareholders Would be Wiped Out

Thursday Dec 7, 2017 ... By Paul Muolo ... [e-mail]



First, the good news: House Financial Services Committee Chairman Jeb Hensarling, R-TX, said he’s ready to cut a deal on GSE reform and is now open to the idea of using Ginnie Mae to be a more active guarantor. The bad news: He wants Fannie Mae and Freddie Mac eliminated, a move that would likely wipe out investors that own GSE common and junior preferred shares.

“The [Hensarling] plan is negative as written for shareholders of Fannie and Freddie as he calls for the companies to be liquidated,” said Cowen analyst Jaret Seiberg in a new report.

If the Texas Republican gets his way, investment firms including Pershing Square and Fairholme Funds stand to lose the millions they’ve invested in GSE common and preferred. Hensarling made his remarks Wednesday during a forum held by the National Association of Realtors.

Of course, it’s early in the process. As reported by Inside Mortgage Finance two weeks ago, the Senate is working on GSE/housing finance reform legislation and Hensarling is still clinging to concepts floated in his past bill, the Protecting American Taxpayers and Homeowners Act.