Fannie Mae (FNMA)

[familymang]

Bingo

[PennMilitia]

The problem FHFA is not Independent

FHFA is the GOVT, Hired and Fired by the President / Senate, and should be funded by the DC swamp rats that have complete control over them.

Its a Supreme Court fallacy that they are somehow Independent. They court must have been smoking something really good that day to come up with that one.

[Achilles deFlandres]

SCOTUS already handled this explicitly in Collins where the role of the director, accountable or not to the executive, has no bearing on the rest of the FHFA/conservatorship. The entire discussion qualifying "independent" discussed these issues. NO DICE

[Guido2]

So, in a Severe Stress Test environment, $FNMA $FMCC would ONLY MAKE $15.6 Billion per year.

Seems pretty safe and sound, and ready for release from Conservatorship@RandPaul @SenatorHagerty @SenatorTimScott @SenJohnKennedy @BankingGOP https://t.co/ETyPxn8UJf

— Jarndyce Jarndyce (@JarndyceJ) August 11, 2022

[Guido2]

CRTs are NO RISK, ALL REWARD for special interests. NO reward for FnF. Don't take my word. Read Tim Howard. He's repeated it many times. He even wrote an entire article on this subject.

https://howardonmortgagefinance.com/2021/05/24/fhfas-crt-report/

[skeptic7]

You're not wrong here.

[Guido2]

Thanks Patswil. Despite the change in people conducting the tests, Fannie & Freddie still solid.

[nagoya1]

10% unemployment rate? Another scifi GSE report that doesn't reflect reality.
There's a shortage workers, I guess ST didn't get the memo from any assistant because she can't hire any....

I wonder how much money was spent on this POS report and when will the FHFA and Treasury satrt doing something REALISTIC with the GSEs remains a mystery.

GO JUDICIAL GO hopefully you do the correct job.

FNMA

[Achilles deFlandres]

Private money to be first at risk. No risk no reward. Anyway, maybe I don't understand how CRTS would affect the GSE status:

no particular order
1. housing trust fund? I don't think CRTs affect this.
2. Growing the bureaucracy? I don't think CRTs curtail this.
3. Keeping control of the housing market? I don't think CRTs affect this.

[kthomp19]

The federal government via the Net Worth Sweep and a myriad of other unsavory anti capitalist/shareholder actions may have seriously put a cold chill on prospective new investor money coming into this public/private partnership.

I agree that new investors might be very reluctant to put money in.

I just think that that will lower the per-share SPO price to the point where their return is good enough to overcome that reluctance. And that price could easily be under $5. The more reluctant new investors are, the worse it is for the existing common.

Otherwise, if FnF cannot raise capital at all, they are stuck in conservatorship until at least 2028 (the fact that the warrants expire in 2028 is a coincidence) and can get out then only if Treasury cancels or converts the seniors.

[familymang]

GSEs 2022 Stress Tests Released (https://fhfa.gov/AboutUs/Reports/ReportDocuments/Final_2022-Public-Disclosures-FHFA_SA.pdf)

- GSEs combined would EARN $15.6b over 9 Q's in the stress test!

- Key Assumptions:
1) Unemployment increases to 10%
2) GDP -3.5%
3) Home prices -29%
4) Commercial RE -35%
5) Equities -55%

[kthomp19]

Wouldn't / couldn't the $69Billion be paid from the extra money they didn't give to Treasury?

Wouldn't FnF have more retained to pay from?

I meant that Treasury would owe FnF $69B, not the other way around. That decreases by the $18.7B per year that FnF are not paying Treasury ever since the September 2019 letter agreement, because without the NWS (and holding everything else equal) FnF would be paying $18.7B per year right now to Treasury but would have $69B more net worth to pay it from.

This does mean that if the unwind somehow happens 4 or more years from now, FnF will actually owe Treasury cash to make up for all the years of not paying them anything because $18.7B * 4 > $69B. I certainly hope it doesn't take that long.

And there were many things that most likely wouldn't have happened if it not were for the 3rd amendment. I would think so.

Almost certainly yes. But I don't think those things can be quantified.

Even after this hypothetical NWS unwind, FnF wouldn't have enough core capital to meet the base no-buffers leverage capital requirement Thompson set out, so they would still be in conservatorship.

[Robert from yahoo bd]

The federal government via the Net Worth Sweep and a myriad of other unsavory anti capitalist/shareholder actions may have seriously put a cold chill on prospective new investor money coming into this public/private partnership.

Stay tuned, we'll see what happens.

[Patswil]

FHFA Announces Results of Fannie Mae and Freddie Mac Dodd-Frank Act Stress Tests


https://www.fhfa.gov/AboutUs/Reports/Pages/2022-Dodd-Frank-Act-Stress-Test-Results_Severely-Adverse-Scenario.aspx?utm_medium=email&utm_source=govdelivery
Published: 8/11/2022
Overview
?
?Fannie Mae and Freddie Mac (the “Enterprises”) are required to conduct annual stress tests pursuant to Federal Housing Finance Agency (FHFA) rule 12 CFR § 1238, which implements section 165(i)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Section 165(i)(2) of the Dodd-Frank Act, as amended by section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”) requires certain financial companies with total consolidated assets of more than $250 billion, that are regulated by a primary federal financial regulatory agency, to conduct periodic stress tests to determine whether the companies have the capital necessary to absorb losses as a result of severely adverse economic conditions. These changes became effective on March 24, 2020. This is the ninth implementation of the Dodd-Frank Act Stress Tests (DFAST) for the Enterprises.

In September 2008, FHFA suspended capital requirements after placing Fannie Mae and Freddie Mac into conservatorships. The Senior Preferred Stock Purchase Agreements that were established between the Department of the Treasury (“Treasury”) and each Enterprise limited the amount of capital that each Enterprise could hold to a Capital Reserve Amount of $3.0 billion. However, on September 27, 2019, FHFA, acting in its capacity as the conservator of the Enterprises, and Treasury entered into a letter agreement modifying the dividend and liquidation preference provisions of the senior preferred stock held by Treasury. Effective with the third quarter 2019 dividend period, the Enterprises were not required to pay further dividends to Treasury until they accumulated over $25 billion in net worth at Fannie Mae and $20 billion in net worth at Freddie Mae. Subsequently, on January 14, 2021, FHFA and Treasury announced amendments to the Senior Preferred Stock Purchase Agreements. The amendments allow the Enterprises to continue to retain earnings until they satisfy the requirements of the 2020 Enterprise Regulatory Capital Framework.

Notwithstanding the capital limits stipulated in the Senior Preferred Stock Purchase Agreements, FHFA requires the Enterprises to conduct DFAST annually in order to provide insight into risk exposure and potential sources of losses in the prescribed conditions. This report provides updated information on possible ranges of future financial results of the Enterprises under severely adverse conditions. The severely adverse conditions assumed are identical for both Enterprises.

The projections reported here are not expected outcomes. They are modeled projections in response to “what if” exercises based on assumptions about an Enterprise’s operations, its loan performance, macroeconomic and financial market conditions, and house prices. The projections do not define the full range of possible outcomes. Actual outcomes may be different.

The 2022 DFAST Severely Adverse scenario is described below. The Enterprises used their respective internal models to project their financial results based on the assumptions provided by FHFA. While this results in a degree of comparability between the Enterprises, it does not eliminate differences in the Enterprises’ respective internal models, accounting differences, or management actions.?

[MannSinger]

5B shares - 1B shares for $26B extra paid=4B

You were right before. lol
So pps is $25.

That extra paid above 10% is $26B which has to applied somewhere- may be 1B shares from warrants returned to FNMA.

[Guido2]

Please explain the CRTs. The great revenues we've seen to date are mainly due to the MBS in their books of business. They are being replaced by the CRTs. This is a hand over of their future profits.

[Donotunderstand]

why is that the only way

Is Fannie worth 100B --- say 10B earnings and 10x multiple

1-1.2B shares out there
WTS exercised --- rounded 5 Billion shares

oops - my math is off as I used 4B before and should use 5B ---- on the above earnings and multiple (changes up if you use 120B and 12 multiple)

Then there are 5B shares for company valued at 100B = 20 a share
or
Then there are 5B shares for company valued at 125B or 25 per share

So this dilution is IMO affordable --- unlike a full conversion of SP/LP to common

But yes - as your example too I think - we need to start with LS/SP is zero for money paid (and in my example for the extra 80-100B the GOV gets from WT)

And NO SPO but GOV immediately backs up the current capital while F and F pay no dividends to include no JPS dividends to collect reserve capital cash

[Donotunderstand]

100B

r u saying to get GOV guarantee some small piece of SP needs to stay --- for example 1B --- and then the dividend can not be 100B

[Achilles deFlandres]

Hand what over? There is no way the FHFA would cede it's wards to the banks. In any case Treasury would have to agree. The GSEs are the arm of a social program and won't go anywhere. There may be a reorg or name change.

What can "go", and in my mind it already has, is value held by shareholders.

The one thwarted plan that bubbled out and was even discussed publicly in oversight with Watt was combining the two into one agency. Remember the "FMIC" idea of which the CSP would be the basis?

[Stern is Bald]

Well good thing is this is going in front orlf Lamberth who was lied to the first time and will understand this given its all come to light..

[Achilles deFlandres]

Good point. It us clear that the Bureaucrats rule. If the Judicuary decides to run to first base, slow walking, non production of evidence....there is no check against them effectively. I really wonder where the US is going. Will the agencies war with each other for supremacy? The elected officials dont help. If you need some non-golf frustration watch an oversight hearing.

[Clark6290]

DeMarco action from a decade ago. Two confirmed Directors could have rescinded or stopped during their tenure. I intentionally left off the third confirmed clown, she isn't in place for her mortgage knowledge.

[MannSinger]

Trump's locker had GSE & Hunter's docs, lol

It looks T lure the DOJ & FBI by purchasing new locker in the middle of investigation of the classified documents.

Anything obtained in the search becomes evidence in the court. It may have declassified GSE docs, Hunter's doc and other Democrat's documents.

[jog49]

" The Appointments Clause of US Constitution limits unconfirmed appointments to 2 years. Yet, the FHFA director, serving for more than 3 years WITHOUT confirmation signed 3rd amendment to Treasury's PSPAs. Thus, that agreement, along with the NWS, is invalid."

To any person with common sense, that's pretty cut and dried. Enter the snake pit (legal profession) and watch how they can tie it all in knots.

[Guido2]

Jim Parrott.

[Clark6290]

Boom. The Willy Wonka Golden Ticket. you found the Golden Cross from Apr 2021. Fer sere we gets some Rubicon action today.

[jog49]

"The majority of the SCOTUS justices might have seen what’s happened in the last 3 days and realize it’s probably them next."

We should be so lucky . . . . .

[Louie_Louie]

Brittney Spears and many others have been put in conservatorships. Amazing how in those situations they never lost any constitutional rights, and a judge was always made part of said consevatorship to oversee things, and make sure a fiduciary duty is followed by the appointed conservator.

With the twins, all that is reversed, put upside down, and the definitions/real world meanings of conserve, conservatorship, fudiciary, and many other words, now have their definitions scrambled or redefined by the judiciary to cover up for the corruption.

Per Websters dictionary:
Conservatorship
1a : one that preserves from injury or violation : protector.

Do ANY shareholders feel they've been preserved from injury? Violation? Does ANYONE see these DC clowns as being able bodied protectors?
I suspect totally opposite.

[kthomp19]

Senior Preferred Stock cannot be converted to Common Stock or any class of Stock UNDER THE TERMS of THE AGREEMENT.

Nope, you're reading it wrong. Here's the relevant quote.

No Conversion or Exchange Rights

The holders of shares of the Senior Preferred Stock shall not have any right to convert such shares into or exchange such shares for any other class or series of stock or obligations of the Company.

The key word is "right". That only means Treasury cannot force a conversion to common without the consent of the company.

It does not mean that the seniors can never be converted to common no matter what. All it takes is for FHFA, as conservator and on behalf of FnF, to agree to conversion terms with Treasury.

[Rodney5]

Senior Preferred Stock cannot be converted to Common Stock or any class of Stock UNDER THE TERMS of THE AGREEMENT.

FOURTH AMENDED AND RESTATED CERTIFICATE OF DESIGNATION OF TERMS OF VARIABLE LIQUIDATION PREFERENCE SENIOR PREFERRED STOCK, SERIES 2008-2

FACT: The Senior Preferred Stock cannot be converted to common stock.
No 6 and No 7

Quote “No Conversion or Exchange Rights

The holders of shares of the Senior Preferred Stock shall not have any right to convert such shares into or exchange such shares for any other class or series of stock or obligations of the Company.

No Preemptive Rights

No holder of the Senior Preferred Stock shall as such holder have any preemptive right to purchase or subscribe for any other shares, rights, options or other securities of any class of the Company which at any time may be sold or offered for sale by the Company.” End of Quote

https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/FNM/SPSPA-amends/FNM-Fourth-Amended-Restated-Certificate-04-13-21.pdf

[Clark6290]

Riding the Barami Candel and Golden Cross, should be ok with all the "good news." DeMarco issues from a decade ago Third Amendment could have been eliminated. After all, Watt and Calabria most certainly could've takin action

[navycmdr]

the FHFA Conservator - charged with Fannie/Freddie

Preserve & Conserve - claims they "DO NOT have a Fiduciary Duty" ...

[navycmdr]

it's $Time to $Cross the $ 0.65 $RUBICON ....

[Hvp123]

Plaintiff Joshua J. Angel is a resident of New York, and owns Junior Preferred Shares of both Fannie Mae and Freddie Mac in amount in excess of $1 million face amount.

Plaintiffs have directed claims under the Tucker Act that are worth more than $55 billion. Plaintiff’s claims emanate from Treasury Agency unauthorized taking for itself of approximately $20 billion of Fannie Mae and Freddie Mac funds which by law should have remained with the companies, and Treasury breach of its contractual guaranty of GSE Junior Preferred share payments, and concurrently rendering $33 billion of Junior Preferred shares (i.e., par value) as permanently impaired and otherwise immediately redeemable as damages, at either termination of this action, or the conservatorship.

[Hvp123]

WHEREFORE, Plaintiff prays that this Court:
A. Determining that this action is a proper class action under Rule 23 of the Federal Rules of Civil Procedure, appointing Plaintiff as Class representative and Plaintiff’s counsel as Class counsel;
B. Award $20 billion in compensatory damages under Counts I and II to the Class against Treasury;
C. Award $55 billion in compensatory damages under Count III to the Class against Treasury;
D. Award prejudgment and post-judgment interest on those compensatory damages;
E. Award Plaintiff reasonable attorneys’ fees (based on a percentage of not less than 2% of the awarded damages) and costs; and
F. Order such other relief as this Court deems just and equitable.

Mr. Angel filed a fresh complaint in the U.S. Court of Federal Claims Monday. This new lawsuit against the government has been assigned to Judge Sweeney. The current deadline for the government to answer or otherwise respond is Fri., Oct. 7.

[KenKong]

Interesting

[MoneyRobot]

As a FnF shareholder, you really should not want the seniors cancelled completely. That would kill the funding commitment, which in turn would drive FnF's cost of borrowing way up and reduce their income by a lot.

Instead we should want Treasury to write down/convert all but $1B of the seniors, that way it is owed very little in dividends post-conservatorship ($100B per year) while the funding commitment remains in place.

Hmmmmmm......i see your point but that is not what a shareholder should prefer post c-ship. Borrowing cost will go up in terms of securing the explicit guarantee and that should be paid for by g-fees. Those will be adjusted to match risk. I do not think a public traded company will benefit with the gov having a stake in equity in the long haul.

[MoneyRobot]

Lets hope SCOTUS takes the case. RKW coming up. It should be good.

[MoneyRobot]

I prefer to look at bid/ask spreads as a ratio (divide the two) rather than a difference (subtract the two). This is also a function of liquidity: FNMAS's bid/ask spread is almost always lower than that of FNMAH, for FNMAJ, for example, even though the div rates aren't far apart

Yes, Liquidity plays into the spread. I like to call it difference because I used the difference between the ask and bid because I aim for a certain price and I want a higher chance to fill. There are different placement strategies when you see a certain range rather that a %. People sell in denominations and not %.
But, I get it. Good point.

Your 3rd is also my 3rd. The name. Fannie is more popular than freddie. I associate the fannie premium to this. Freddie is the stronger company though.

We pretty much agree. Although I want to add fix rate vs variable rates do affect the price. Fixed rates are more expensive but as rates rises variable closes the gap somewhat. I am the value shopper and I am to maximize RV over divy rate. I do hold fmcct/p/h/o also. I buy those when the fix/var pps are closer to parity.

[Wise Man]

It's been explained that the NWS was enabled by the CFR1237.12, that had an effective date exactly coinciding with the 210-day time limitation for Acting Directors, July 20, 2011.

Hence, a capital distribution for their recapitalization in a escrow account at the UST.
Check it out.
Hello?
WHERE HAVE YOU BEEN!

Now, find another guy to repeat your false statement.

[stockprofitter]

The Appointments Clause of US Constitution limits unconfirmed appointments to 2 years. Yet, the FHFA director, serving for more than 3 years WITHOUT confirmation signed 3rd amendment to Treasury's PSPAs. Thus, that agreement, along with the NWS, is invalid.

Get your popcorn ready.

[stockprofitter]

Yada, yada, yada, and then there is this >

The Appointments Clause of US Constitution limits unconfirmed appointments to 2 years. Yet, the FHFA director, serving for more than 3 years WITHOUT confirmation signed 3rd amendment to Treasury's PSPAs. Thus, that agreement, along with the NWS, is invalid 🧵$FNMA $FMCC @FedSoc pic.twitter.com/1LfKrasQSd

— Jarndyce Jarndyce (@JarndyceJ) August 10, 2022

[Wise Man]

@Guirdo, the secret plan is ACCORDING TO THE LAW, not according to Wise Man. Hello?
Those that have covered up the law and the CFR, face 10 years in prison for the crime of Making False Statements.
10 years more for the crime of conspiracy to defraud the United States.
Others, 5 years in prison for each of the 6 Securities Law violations that have been denounced (basically all the FHFA directors and the FHFA counsels)
The accessories that write on internet message boards, will be sentenced to half that amount.

Attorneys, judges, plaintiffs, FHFA directors, etc.
The Fanniegate trials shall commence!

[heanza]

The majority of the SCOTUS justices might have seen what’s happened in the last 3 days and realize it’s probably them next.
Hopefully they jam it right up the totalitarian state’s rear entrance and break it off.

[Achilles deFlandres]

Clarification has been made. In closing arguments something like "liquidation preference has value" was stated explicitly because council understood that the Judges didn't understand. I still don't believe the Judges have read the statute or even the complaints fully. It would seem to me that page limits and 1hour time limits are an open gate for complex violations against complex statutes in the courts. It would follow that there is another limit: how much research is required in 1 page limited case with 1hr or orals allowed? I also believe that they don't have a firm grasp on securities and finance laws and rights. Something like Roe may be easier from a legal standpoint because it is a simpler relationship of statute to the constitution. All of these GSE lawsuits seem to have been mired in endless minutia.

The GSE saga really looks like a RICO case mob shakedown at least from my standpoint. The classic definition of a racket includes cases where the remedy is actually harm to the victim.

Conservatorship to save you from yourself? Harm. The conditions for conservatorship had not been met and further harm was inflicted during.

Help with the books uhhh we meant three-shell-monte? HARM

10% dividend? HARM! who gets 10%? What benevolent investor gets 10%? It doesn't matter that the statute prevented distributions.

Uhhh record profits? $60B????!!!??? Uhhhh Let us help you with that death spiral (which we caused). Give us everything...What? Don't worry all the cash quarterly and liquidate as you can over 6years. Its all good G! You have a life line no more worries. Irreparable harm.

[Bostonsesco]

The judges about to make up justifiable excuses like they have for every other unconstitutional act. They jus looking for the goofy terminology.

[Achilles deFlandres]

>>Had they gone straight to Receivership originally they could legally be doing everything they have done.>>

No, As Hamish Hume pointed out at the Perry appeal is that in receivership the shareholders have definite rights. IN conservatorship, none. In receivership, it is liquidate and wind-up. Additionally, the books would be open and under scrutiny of the courts. In conservatorship, as we have experienced every single day, there are no shareholder rights. Everything takes precedence over the shareholders. The "certain Constitutional rights" SCOTUS claimed the shareholders have are still undefined or non-existent. In either case those "rights" =ZERO DOLLARS for the shareholder.

[Achilles deFlandres]

I would like to believe that rules limiting the bureaucracy will be enforced. Mounting evidence is that the three branches set up by the Constitution are subservient to the Bureaucracy at the explicit expense of the public.

[M I A]

Wouldn't / couldn't the $69Billion be paid from the extra money they didn't give to Treasury?

Wouldn't FnF have more retained to pay from?

And there were many things that most likely wouldn't have happened if it not were for the 3rd amendment. I would think so.

But I understand your explanation. With some expansion with those two questions if you don't mind.

Thanks.

[kthomp19]

Voided would indicate the NWS never happened reverting back to 10%.
And if it goes back to 10% then they have been paid back plus some.
So question one is answered with a NO for conversion. No sp would exist.

Plaintiffs in the various cases presented two ways in which to void the NWS. The one you outline is one of them.

The other involves the assumption that FnF would have just paid the 10% dividend on the seniors of $18.7B per year and kept the remainder. Treasury would have to repay this remainder in cash but would keep the seniors fully intact, though only at a liquidation preference of $187B because that's where it stood the day the NWS was signed.

Before the September 2019 letter agreement that remainder (the cash payments over the 10% dividend rate) was $125B. But now that number has gone down because for the last three years, FnF has paid Treasury zero in cash dividends. If the NWS hadn't happened FnF would have paid $18.7B per year instead. So the remainder Treasury would owe FnF in cash is now $69B (in addition to resetting the liquidation preference to $187B), which is $125B minus 3 times $18.7B, and that overage drops every quarter as FnF retain earnings.

At that point there would be no more possible court victories coming, except perhaps damages directly to shareholders in Lamberth's case. In this case, Treasury would be certain to convert the seniors to commons to make up that $69B outlay rather than cancel the seniors and eat a $69B loss.

The problem with your approach, which was the plaintiffs' first recommendation, is that it assumes the seniors could be paid down at any time. This is incorrect, as I showed in this post. Since the funding commitment has never ended, FnF could not and cannot pay down the seniors any time they want(ed). That means unwinding the NWS cannot result in the seniors disappearing because it would violate the terms of the original SPSPAs, which were signed before the NWS and no plaintiff is trying to overturn those.