Fannie Mae (FNMA)

[Wise Man]

The link between unrealized losses and the conservatorship is clear.
FnF were placed in conservatorship pursuant to the FHEFSSA section 1367(a) APPOINTMENT OF THE AGENCY AS CONSERVATOR (which, by the way, was an amendment inserted by HERA in the FHEFSSA), according to the SPSPA:


Although it isn't specified, there are 12 reasons for the conservatorship at the discretion of the FHFA.
Likely, it was chosen (G) LOSSES: Likely to incur losses that would deplete all of its capital.
Related to future (fabricated) losses, not past losses as Washington Federal (bailed out by the Treasury Department in 2008) claimed in court in a clear case of misrepresentation of the law.
Spot on! Those future losses came true if they were all fabricated:
-The 10% dividend to Treasury.
-The DTA valuation allowance.
-Outsized provisions for loan losses caused by the prior Incur Loss accounting standard and the Obama's programs, as FnF were compelled to set aside a reserve equal to the concession granted to borrowers, not the actual expected loss (it was changed in January 2020 for the CECL accounting standard). An amended in 2011 ballooned the borrowers elegible, as now, it was up to the management to decide if one borrower current on its mortgage payments was at risk of default.
-The initial $1B SPS LP issued for free, it reduce the Additional Paid-In Capital account (Core Capital) in the same amount (currently in place with the SPS LP increased for free every quarter, but the managements commit financial statement fraud by not posting both operations on the balance sheets)
-The mispricing of the PLMBSs.

Their ambition to prompt losses, so more SPS LP is increased, fired back, because the dividend was restricted and unavailable, and instead, it was a separate account for the reduction of the principal of the obligation, similar to the one with the FHLBanks in 1989.

Finally, have you noticed in the screenshot that the FHEFSSA is cut short with "FHE Act"? Typical in documents. But then, it has deviated to today's "GSE Act" in the Earnings reports from FnF.
This way, they seek to delete any trace of the FHEFSSA that contains the only authorized capital metrics and their definition; the capital classifications and definitions, to see that the Minimum Leverage Capital level is met with Core Capital or with CET1 and T1 Capital added recently, and the Risk-Based Capital requirement, met with Total Capital. They aren't met with "Capital Reserve", an invalid capital metric in the FHEFSSA and badly assessed (adjusted Capital Reserve = $0), only used by the Federal Reserve System in its battered Balance Sheet (Called "Capital Surplus" but it's the same concept).
"GSE Act", looks more like the Charter Act, which is also being concealed.

This is like other plotters all day with "HERA, HERA, HERA" (Rosner and the plaintiff Joshua Angel and khtomp19 on this board), when it's the FHEFSSA (and the Charter Act) as amended by HERA. Never HERA alone.
They don't want you to see what HERA didn't amend: Critical Capital level, definitions, etc. And also, what did HERA amend? Because HERA struck the prior MANDATORY release Undercapitalized: when the Core Capital (Tier 1 Capital) > Minimum (Leverage) Capital requirement (2.5% of ATA in their ERCF).
Calabria/Mnuchin chose a steep CET1 > 3% of ATA, which was snubbed.
Under the Separate Account plan, FnF have CET1 > 2.5% of ATA. Which bodes well for the redemption of the JPS (AT1 Capital) at their fair value of par value, and then, FnF would comply with the ERCF of Tier 1 Capital > 2.5% of ATA. Also complying with the FHFA's desire of "membership cleansing" before the Privatized Housing Finance System revamp chosen for the release in 2011 by the UST, at the request of the Dodd-Frank law, as seen in its 2016 Final Rule with the FHLBanks, that ordered the expulsion of the unwanted members.

We can even spot that Calabria forgot with HERA to include in the FHEFSSA the typical "18-month implementation" (like in the very FHEFSSA in question when the first capital ratios in 1992), when it directed the FHFA director to change the capital requirements and add new capital metrics (CET1 and Tier 1) besides a Capital Buffer, that would have prevented the current "back-end Capital Rule" (effective February 16, 2021), that is, enacted after the Transition Period to build capital, given always by any Federal Agency when there are changes.

The mandatory release implies that FnF have to build regulatory capital in the first place.
Playing with the words is their modus operandi: "dividend obligation", in order to pass it off as interest payments on obligations (1989 FHLBanks' bailout) and skip the Restriction on Capital Distributions (Dividends; SPS LP increased for free; the Lamberth rebate), besides unavailable Earnings for distribution as dividend, out of an Accumulated Deficit Retained Earnings accounts all along.