Fannie Mae (FNMA)

[M I A]

When the 3rd is voided was the question and not a specific way of straightening out the mess. At least that's how I read it.

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.

Question 2 see above.

Question 3 Yet? Implies they will. We don't know anything.

Question 4 Who knows exactly? Not me.

Question 5 ?. Again not me.

Question 6 ? Not me again.

Question 7 ? Not me. Yet again.

But true depending on assumptions one makes your range makes sense.

[kthomp19]

When the 3rd Amendment is voided out what will be the share price?

There are way too many variables to give a precise answer here. The following questions would need to be answered to narrow things down:

1) Will Treasury convert the seniors to common as part of the NWS unwind, as the Collins plaintiffs are asking for?
2) Will the seniors still be in place (absent a conversion)?
3) Will Treasury have exercised the warrants yet?
4) What will FnF's capital deficit look like at the time?
5) How much capital would FnF have to raise to meet the capital requirements for exit? (Those should be the base, no-buffers requirements set forth by Sandra Thompson: core capital equal to 2.5% of adjusted total assets)
6) What is the status of the other court cases?
7) What is the then-President's stance on recap/release? (NWS unwind might not happen until the next Presidential term)

Depending on the assumptions one makes, the answer could be anywhere from $0.05 to over $50. #1 in that list is by far the most important.

[kthomp19]

I thought about that too. Its not just liquidity its also fixed rate.

I have run multiple linear regressions on the past prices of the juniors, and the two biggest explanatory variables by far were (in order) liquidity (measured as the median % of total issue that trades per day over the lookback period) and dividend rate (regardless of fixed or variable).

In a distant third is the dummy variable I called "Fannie?", which was equal to 1 if the series was Fannie and 0 if Freddie.

But the range is similar for all the 25s in terms of ask-bid = x(distance).

If you're just subtracting, this shouldn't be surprising because the 25s trade at a lower price than the 50s.

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.

Liquidity and fixed rate can be a factor but, there is more. My answer is along the line of "liquidity" that its simply cheaper to buy in and its speculation. There is more speculation in 25s as liquidity popularity = better speculation potential. Then again, all fnf plays are speculative.

I agree.

25s are traders? Not really?

Trading the juniors is quite difficult due to low liquidity. I have tried in the past with some occasional middling success. But anyone can guess on the direction of a stock, and tons more stocks out there are more liquid.

[kthomp19]

Really?

Why should they? New investors won't care about the fate of 2022 shareholders because the two main actions that the government took to screw shareholders happened in 2008 and 2012.

If new investors want previous shareholders to be treated "fairly", they would demand compensation be paid only to whoever held shares on September 6 2008 and August 17 2012, regardless of if they still own those shares, because those are the shoes the new investors would be stepping in to.

There is nothing this (or any future) administration can say or do that can completely assure new investors that another conservatorship and/or NWS won't happen again. Especially when the Supreme Court said that the NWS is an authorized action of FHFA as conservator. The only way to hedge this risk is to keep lowering the per-share SPO price until the market clears. And the things the government did in 2008 and 2012 only serve to make that price rather low indeed.

At one point there had been speculation that some current common shareholders could be asked to contribute money towards the SPO, but that hope is all but gone now. With AGTHX selling all of its common shares, there is only one known common shareholder of any consequence left (Ackman), who bought some juniors in 2017-2018 in part because "it hedges our risk of a restructuring that disproportionately benefits the preferred versus the common shares". That's a direct admission by Bill Ackman that he both thinks the juniors could outperform the commons, and that he won't be able to do anything about that (other than buy junior prefs).

[M I A]

If it is voided, we would still be waiting for full or final share price, but I can see it being a low of $6/$7 easy up to $20ish on short squeeze. A crazy short squeeze would most likely be followed by a pull. Remember we'd still be waiting on what happens with jp, warrants, and cap raise issue. Plus gov appealing verdict of course. The government would need a $14+ pps for warrants to be worth $100billion we keep hearing about. IF the warrants are used. IF.

BUT who knows when this all ends. Looking forward to good things for you and the rest of us.

This is all just my opinion.

[FNMAstalker]

When the 3rd Amendment is voided out what will be the share price?

[MannSinger]

Only way gov can get $25 by giving warrants back to GSE and instruct GSEs to use for $10K down payments for 1st time home buyers in next 5-10years starting from 2020.

[Robert from yahoo bd]

because new investors won't care at all what happens to pre-SPO investors as long as the new ones get a good enough return.

Really?

[Donotunderstand]

we mostly disagree but I like reading your thoughts (even sometimes ideas are presented as facts)

yes = WTS were taken as extra goodie --- because they could !!!

the GOV should use them and keep 100B and brag and brag - while they kill the SP and LP is zero and no Secondary offering

5B shares - 4B to GOV sold to public for 25 a share - GOV takes the money

[Donotunderstand]

A lot there but
if the Treasury would deem the liquidation preference paid and the Senior Preferred Stock canceled the company's common stock could be relisted on the NYSE and trade at fair value,

yup
yup
yup

then the next two steps --- GOV uses the WTS so they can BRAG they got 100B plus the 300B paid so far !!! big profit for GOV hides the killing of SPS

and if the GOV says - now we have enough - until F and F make more money so

no dividends until x dollars in capital
and GOV is second backup guarantee on capital - after the 100b or whatever F and F have already
AND
KEY
no more shares - 5B or so is it --- pps will be about 25 per share for us and GOV on its wts
case closed
win win win

[Donotunderstand]

yup

I like their wording and how they laid it out

[Donotunderstand]

I do not know what is true

But your suggestion - hand over to TBTF banks -- sure sounds like Paulson !!!!

[Louie_Louie]

Wrong! Lol

[Robert from yahoo bd]

POTUS'S couldn't kill them nor the FHFA and the Treasury. This calls for the United States Supreme Court or the Congress to do it and so far that hasn't happened yet. But the $ 308B question is will they?

[Stern is Bald]

One of my favorite case points is the FHFAs director was not authorized to sign off on the 3rd amendment or enter that contract…

Illegal from the get-go…

[jog49]

"Being in Conservatorship they have an obligation to preserve and conserve"

And, of course, they did just the opposite. Drain all the sap from a tree and it's going to die . . . plain and simple.

[jcromeenes]

The reality of this entire situation is that they put the GSEs in to Conservatorship but have acted the entire time like they are in full Receivership. Had they gone straight to Receivership originally they could legally be doing everything they have done. Being in Conservatorship they have an obligation to preserve and conserve >>> all actions would be meant to put them on sound footing and back to a safe, secure and functioning entity. That's where they went wrong yet continue to act as if they didn't screw that up.

[M I A]

I can understand your point of view, but it's far from nonsense.
Thinking of warrants as being totally unrelated to recouping of treasury "investment" is more likely the nonsensical view.
But....
JMO

[Rodney5]

First, Treasury and FHFA must agree to cancel the net worth sweep and eliminate Treasury’s liquidation preference. Fannie and Freddie already have repaid their senior preferred stock, with 10 percent interest. Is it ethical, morally good or correct, to make the companies’ repay their indebtedness to Treasury twice?

Professor Richard Epstein
Quote: "In closing, there is a simple test by which to measure the probity of the combined actions of FHFA and Treasury. If FHFA were replaced by a private trustee, and Treasury were replaced by a private supplier of fresh debt or equity capital, both parties would end up in jail if they concocted a scheme that resembled the NWS. Everyone would cut through the various smokescreens to see that the excess dividends were a naked raid on the interests of the other shareholders as happened here.” End of Quote

Richard A. Epstein is the Laurence A. Tisch professor of Law at NYU, senior fellow at the Hoover Institution, and senior lecturer at the University of Chicago Law School."

[trunkmonk]

They should be cornered, and if so, this would be their way out of a catastrophic embarrassing event that could result from many things becoming public. I don’t want to assume anything, their arrogance, as in the case of Ps claiming fantasies through receivership that would never be. GSE shareholders deserve 100 a share, but we all know that will not happen.

[Clark6290]

Water under the bridge (decade ago). Mel Watt appointed and Mark Calabria appointed could have eliminated the Third Amendment. We didn't get very far with SCOTUS constitutional claim, sure Calabria was replaced, DeMarco has been long gone.

[Guido2]

Good post Rodney. Just remember that SPSPA and all the amendments are not the law. They're just agreements between two swindling government agencies. Agreements can be undone. That's what Janet Yellen and Sandra Thompson will have to do, to some extent, if they don't want to be embarrassed in Judge Lamberth's court. The minimum is the write down of SPS and Liquidation Preference to zero. This will automatically get rid of the bogus accumulated deficit. This will increase the equity of each corporation by the same amount of the vanishing deficit.

[jog49]

"Exhibits are submitted as part of the scheduling order and have to be agreed upon- The exhibits will be unsealed when the parties agree- everything will be unsealed at trial ….. you would know that if you were an attorney."

Among the exhibits, why couldn't the plaintiffs submit photos of the tombstones of all the former shareholders who bought Fannie and Freddie in good faith but never lived long enough to gain any benefit because of the scandalous seizure and long running refusal to release?

[navycmdr]

$Anxiously $Waiting to $See if the $Rop $Judges agree with this

"appointments clause" that is limited to TWO YEARS Argument ...

we could very well see the Ruling any day now ...

[kthomp19]

According to Professor Richard Epstein
The Senior Preferred Stock would have been redeemed.

Richard Epstein has been a great source of information on FnF, and I respect his opinions.

On this matter, though, he is just plain incorrect. I posted the exact language of the contract:

Prior to termination of the Commitment, and subject to any limitations which may be imposed by law and the provisions below, the Company may pay down the Liquidation Preference of all outstanding shares of the Senior Preferred Stock pro rata, at any time, out of funds legally available therefor, but only to the extent of (i) accrued and unpaid dividends previously added to the Liquidation Preference pursuant to Section 8 below and not repaid by any prior pay down of Liquidation Preference and (ii) Periodic Commitment Fees previously added to the Liquidation Preference pursuant to Section 8 below and not repaid by any prior pay down of Liquidation Preference.

There are four ways that the senior pref liquidation preference can be increased. Three are in Section 8(b) on page 5 of the senior pref stock certificate (the fourth is the dollar-for-dollar increase "ratchet" as FnF retain earnings, in the September 2019/January 2021 letter agreements):

(b) “Liquidation Preference” shall initially mean $1,000 per share and shall be:
(i) increased each time a Deficiency Amount (as defined in the Preferred Stock Purchase Agreement) is paid to the Company by an amount per share equal to the aggregate amount so paid to the Company divided by the number of shares of Senior Preferred Stock outstanding at the time of such payment;
(ii) increased each time the Company does not pay the full Periodic Commitment Fee (as defined in the Preferred Stock Purchase Agreement) in cash by an amount per share equal to the amount of the Periodic Commitment Fee that is not paid in cash divided by the number of shares of Senior Preferred Stock outstanding at the time such payment is due;
(iii) increased on the Dividend Payment Date if the Company fails to pay in full the dividend payable for the Dividend Period ending on such date by an amount per share equal to the aggregate amount of unpaid dividends divided by the number of shares of Senior Preferred Stock outstanding on such date;

"Prior to the termination of the Commitment", which is the world we are in right now, FnF can only pay down increases in the liquidation preference that occurred due to incomplete or missing Periodic Commitment Fees, and incomplete or missing Dividend Payments. These correspond with (ii) and (iii) in Section 8(b).

None of those two things has ever happened. Instead, all increases (up until September 2019) to the senior pref liquidation preference have happened due to (i) in Section 8(b), which were draws from the funding commitment. (This is also why the seniors can't fully disappear if FHFA/Treasury want the funding commitment to stay; the seniors have to exist to provide a mechanism to compensate Treasury for drawn money.)

Section 3(a) specifically does not allow FnF to voluntarily pay down the increases in senior pref liquidation preference due to draws, which comprise $192B of the $193B of senior pref liquidation preference on the balance sheets. (The extra $1B was the initial liquidation preference.)


FnF do not have, and have never had, the ability to voluntarily pay down the $193B of senior pref liquidation preference on the balance sheet. This is not an opinion, it's a fact.

[955]

All of that is moot as long as we're in 'jail'.

[Rodney5]

According to Professor Richard Epstein
The Senior Preferred Stock would have been redeemed.

Quote “The conflict of interest took a more ominous turn with the adoption of the Third Amendment between FHFA and Treasury nearly four years later. At that time, the market had quieted down, and the GSEs were making timely dividend payments on Treasury’s preferred stock. Nonetheless, FHFA and Treasury ripped up the old agreement, and substituted in its place a new deal that created a “net worth sweep” whereby all of the funds received by the GSEs were paid over to Treasury as a dividend, even in amounts far in excess of the original 10 percent dividend. The consequences have been huge. Without the Third Amendment, virtually all the senior-preferred stock would have been redeemed. With the Third Amendment, about $128 billion that could have been used to redeem the preferred shares has been reclassified as a dividend payment, rather than a return of capital.” End of Quote

Please Note: “Without the Third Amendment, virtually all the senior-preferred stock would have been redeemed.”

Link: https://ricochet.com/326448/fannie-freddie-fiasco/

[kthomp19]

In addition the warrants the Treasury holds should not be exercised, the Treasury has been paid in full, no reason the Treasury due 79.9% of the common stock of the company.

More nonsense. The warrants exist to provide enhanced value to the taxpayer. They have absolutely nothing whatsoever to do with Treasury recovering more than its initial investment.

Note 2: The liabilities on the books of $4.3 trillion are backed by real property, it's not liabilities at all tangible assets.

It's hard to tell what this even means. The entire purpose of a balance sheet is to show the balance between assets and liabilities, with any differences belonging to the equity section.

Fannie has $4.232T worth of liabilities on the balance sheet. Not zero.

The advantage of the JPS is in a receivership; And receivership is not in discussion any longer.

Nope. The juniors sit above the commons in the capital stack. That means if the commons are worth even a penny then the juniors are worth full par, and if the juniors are worth anything less than par then the commons are worth zero. That's true in receivership, in conservatorship, and outside of both.

An advantageous position in the capital stack means everything in a restructuring, and FnF must go through an equity restructuring before leaving conservatorship because they are hundreds of billions of dollars short of their regulatory capital requirements.

FACT: The Liquidation Preference can be paid in full and the SPS canceled.

I glossed over this the first time, it got lost in all the other common nonsense.

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.

[kthomp19]

If the FHFA would adopt the suggestion from Mr Howard, at 2.5 percent capitalization requirement this would open up, and facilitate, a path for the companies out of conservatorship.

FHFA already has mostly adopted this suggestion. The base (without buffers) minimum capital requirement for FnF is 2.5% of adjusted total assets. That's more than the 2.5% of balance sheet assets required by 12 USC 4612(a), but only by 6% for Fannie and 16% for Freddie.

You can see Fannie's adjusted total assets of $4.545T on p. 58 (p. 61 of the pdf) of Fannie's Q2 2022 10-Q form, compared to $4.289T on p. 69.

If the Treasury would deem the liquidation preference paid and the Senior Preferred Stock canceled the company's common stock could be relisted on the NYSE and trade at fair value, this could happen only if the Treasury would assure the market that the company has been returned to shareholders as a for profit publicly traded company. The company could still function for the purpose of its charter.

The exact same thing can happen if Treasury converts the seniors to commons, because new investors won't care at all what happens to pre-SPO investors as long as the new ones get a good enough return.

$4.3 trillion x 2.5 percent = $107.5 billion of total assets minus $56.4 billion company's net worth = $51.1 billion amount in a secondary offering to adequate capitalization.

Once the seniors are written off or converted to common (or some combination of both), Fannie's core capital will be $57B. 2.5% of the $4.545T above is $114B, meaning the secondary offering (if done right now) would have to be $57B.

Secondary Offering IPO would add Equity (cash) to the balance sheet, the secondary offering contributes the necessary capital to satisfy the FHFA requirement under the set capital rule. Keep in mind, new investors are buying earnings power of the business, the Shareholders are not giving away the company in a secondary IPO without a price; Investors are doing just that buying into the company.

Existing shareholders have no power and no say in how much capital is raised or at what price. FnF will set the SPO price to whatever it takes to clear the market. Fannie's core capital requirement is $114B and investors would have to contribute $57B if the SPO was today, meaning they would insist on at least half of the total equity.

If new investors insist on 75% of the equity to recap FnF and FHFA tells the companies to accept the deal, it will happen no matter what existing shareholders think.

Example: If the company is required an additional $51.1 billion as a capital requirement to reach the $107.5 billion of the 2.5 percent of total assets, and to make the secondary offering attractive the price per share could be at extreme discount of 15 percent and in this case the secondary offering would price at $38.79 per share;

No, it doesn't work this way at all. If new investors want half the overall equity, the discount would be 50%. If they want 2/3 of the equity, the discount would be 67%, etc.

Your market cap estimate of $263B for Fannie alone is also quite unreasonably high. Fannie's normalized income right now is only around $15B (it was very skewed by 2020 and 2021), and Tim Howard has said that FnF's P/E multiple lagged that of the market by around 40% even before FnF were in conservatorship. A much more reasonable estimate for Fannie's post-conservatorship market cap is $150B, and it could be even lower at the time capital is raised (which affects how many shares new investors get).

Conclusion, the GSEs business model, simply there’s no better. So, Fannie Mae can issue, at a later date in time (no rush), Non Cumulative Preferred Stock replacing the higher dividend payment to the existing JPS at a lower payout rate. The JPS Shareholders receive Par Value with a New offering.

What would be even better for the companies is to offer the juniors a generous conversion to common, like Citi did, and have $33B worth of room between the CET1 and Tier 1 capital standards to issue new juniors. That would cut the size of the common equity raise by up to $33B (depending on how many junior pref holders accept the conversion).

Such a conversion would be perfectly legal and in accordance with the juniors' contracts. Those contracts have the same "No Conversion Rights" language that the seniors do, but all that means is that the juniors can't force a conversion to common. They can be offered one at any time.

[navycmdr]

FHFA Announces Updates for Servicers to Maintain Fair Lending Data

(FHFA Fails @ Good Faith & Fair Lending - Jury Trial will Splain it to them)

August 10, 2022

Washington, D.C. – The Federal Housing Finance Agency (FHFA) today announced that Fannie Mae and Freddie Mac (the Enterprises) will require servicers to obtain and maintain fair lending data on their loans, and for this data to transfer with servicing throughout the mortgage term.

The fair lending data to be maintained includes borrowers’ age, race, ethnicity, gender, and preferred language. Servicers will be required to implement this change starting on March 1, 2023. This update follows a May 2022 announcement, which requires lenders to collect borrowers’ language preference data.

“The need for collection and maintenance of quality fair lending data is a lesson learned from the foreclosure crisis and COVID-19 response,” said FHFA Director Sandra L. Thompson. “Having fair lending data travel with servicing will help servicers do the important work of providing assistance to borrowers in need, helping to further a sustainable and equitable housing finance system.”

[stockanalyze]

i was hoping to see in latest scotus filings that plaintiffs would clarify the fact that nws has not stopped: just pocketed from one pocket to another. judges were misled in believing it has stopped and i believe a clarification should be made.

[MoneyRobot]

Nice green day for all thus far!!! Eom

[MoneyRobot]

Without the lawsuits, we would be in worst shape than we are now. The NWS would still exist. Even though we have a de facto NWS, it still allowed us to retain something while increasing the RV of the sps. That monies at least did not go to DIVIDENDS which you can kiss goodbye FOREVER!

As long as the monies are not dividends, we have a chance to recover it. Nothing in life is free....go figure

[kthomp19]

WRITTEN IN THE CONTRACT STATES THE MONEY SENT TO THE TREASURY PAYS DOWN THE LIQUIDATION PREFERENCE AND WITH THIS PAY DOWN THE SPS REDEEMED.

WRONG.

FnF does not and has never had the ability to pay down the seniors at will. See Section 3(a) in the document you linked to (emphasis added):

Prior to termination of the Commitment, and subject to any limitations which may be imposed by law and the provisions below, the Company may pay down the Liquidation Preference of all outstanding shares of the Senior Preferred Stock pro rata, at any time, out of funds legally available therefor, but only to the extent of (i) accrued and unpaid dividends previously added to the Liquidation Preference pursuant to Section 8 below and not repaid by any prior pay down of Liquidation Preference and (ii) Periodic Commitment Fees previously added to the Liquidation Preference pursuant to Section 8 below and not repaid by any prior pay down of Liquidation Preference.

The funding commitment has been in place since the original SPSPAs were signed in 2008, and no liquidation preference increases due to either (i) or (ii) above have ever occurred.

The part before that in 3(a) says FnF can voluntarily pay down the seniors after the funding commitment terminates, but it's still in place right now so that part doesn't apply.

The pay down option of the Liquidation Preference and cancel of the SPS was worded in the documentation between the Treasury and the Companies at the time when Fannie and Freddie were put in conservatorship, This wording remains unchanged today.

You're right, the language has remained unchanged since 2008. FnF cannot voluntarily pay down the seniors right now, and they never could.

The Facts remain the Liquidation Preference has been paid in full and the SPS should be cancelled.

1) There's no such thing as paying liquidation preference in full.
2) An extension of your logic is that a preferred shareholder in any company should just give up their shares for nothing in return whenever the total dividends received exceeds the liquidation preference. That doesn't happen in the real world, why should it happen here?
3) This is only what you think should happen. That has nothing to do with what will happen. Treasury has no reason to cancel the seniors when they can convert them to commons instead.

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

WRONG.

The section about "No Conversion or Exchange Rights" only means that Treasury cannot unilaterally, i.e. without FHFA's consent, convert the seniors to commons. If FHFA and Treasury agree, they can amend the SPSPAs however they want, including removing this clause and allowing for a later conversion to common.

The CEO'S OF BOTH COMPAINES ARE APPOINTED BY THE TREASURY; and for this reason, we as Shareholders have no representation of our rights as owners of our companies.

The first part is wrong. They are appointed by FHFA. Your reasoning is wrong too: shareholders have no representation rights right now because FHFA succeeded to those powers as conservator pursuant to HERA.

FACTS READ THE CONTRACT.

I did, but it's clear you didn't.

No one from the company has sent a letter to the Treasury stating the Liquidation Preference is paid in full and the Senior Preferred Stock canceled. Instructions are written in the contract to do so.

Where are these instructions? What page and section?

[skeptic7]

scotus already answered how they perceive the NWS. Remanding for other foolishness is just the easy way to kick the can in to someone else's court. Dely Delay Delay. It's worked for 14 years, and will work for another 14

[JOoa0ky]

The plaintiff's attorneys... which means the Plaintiffs on all of the cases.

Who has been holding plaintiff attorneys accountable? Anyone? Who hired them? Who bought them off? Just how much have they bagged over the past 14 years? An investigation of financial records is in order.

[955]

Who has been holding plaintiff attorneys accountable? Anyone? Who hired them? Who bought them off? How many beachfront properties have they purchased? How many Lambo's are sitting in their garages? Just how much have they bagged over the past 14 years? An investigation of financial records is in order.

[Sammy boy]

Fannie paying for all those illegal cell phones handed out and monthly billing statements!

[BREAKER098]

Good post, however, I believe you have two very generous #'s assigned to two very important #'s. Full Year Net Profit will not be 18+ billion. I'd say a more accurate estimate is closer to 12 billion. I also believe that your PE multiple (14) is a little aggressive - i'd say more like 12 as well. So instead of around PPS of $36 - I'd say it's more like $25.

[Rodney5]

If the FHFA would adopt the suggestion from Mr Howard, at 2.5 percent capitalization requirement this would open up, and facilitate, a path for the companies out of conservatorship.

If the Treasury would deem the liquidation preference paid and the Senior Preferred Stock canceled the company's common stock could be relisted on the NYSE and trade at fair value, this could happen only if the Treasury would assure the market that the company has been returned to shareholders as a for profit publicly traded company. The company could still function for the purpose of its charter.

Example of a Secondary Offering IPO calculated for Fannie Mae.

From 2nd Quarter 10Q 2022,

Quote: “Fannie Mae is a leading source of financing for mortgages in the United States, with $4.3 trillion in assets as of June 30, 2022.” End of Quote.

$4.3 trillion x 2.5 percent = $107.5 billion of total assets minus $56.4 billion company's net worth = $51.1 billion amount in a secondary offering to adequate capitalization.

Secondary Offering IPO would add Equity (cash) to the balance sheet, the secondary offering contributes the necessary capital to satisfy the FHFA requirement under the set capital rule. Keep in mind, new investors are buying earnings power of the business, the Shareholders are not giving away the company in a secondary IPO without a price; Investors are doing just that buying into the company.

Fair Market Value of the Earnings Power of the business $45.64 per share. (this calculation includes the 79.9% warrants converted to common stock). How much of a discount of the fair value the company would have to give up to attract new investors to participate in such a secondary offering I am not sure. The below example I will use a 15 percent discount.


Fannie Mae
07/29/2022
Reports $4.7 Billion for Second Quarter 2022

EARNINGS POWER OF THE BUSINESS
Market Cap $263 Billion
Fannie Mae’s common stock outstanding 1,158,087,567

$4.7 billion net income for the second quarter of 2022.
Fannie Mae’s net earnings $4.7 billion per quarter, a projection of $18.8 billion net per year.

With the WARRANTS: Fannie Mae’s common stock outstanding 1,158,087,567 diluted by the warrants at 79.9 percent adds a total of 5,761,629,686 shares outstanding…

$18.8 billion net / 5,761,629,686 = $3.26 per share of earnings,

PE Ratio of 14 x $3.26 = $45.64 per share intrinsic value,

Market Cap 263 billion / 5,761,629,686 billion shares = $45.64 per share intrinsic value.

Example: If the company is required an additional $51.1 billion as a capital requirement to reach the $107.5 billion of the 2.5 percent of total assets, and to make the secondary offering attractive the price per share could be at extreme discount of 15 percent and in this case the secondary offering would price at $38.79 per share;

$45.64 Per Share Intrinsic Value minus 15 percent = $38.79

$51.1 billion secondary IPO / $38.79 = 1,317,349,832 billion new shares.

After the secondary offering a total of 7,078,979,518 billion common shares outstanding.

Market Cap 263 billion / 7,078,979,518 billion shares = $37.15 per share intrinsic value.

FROM A PRIVATE INVESTOR POINT OF VIEW:

Example with Warrants:
Estimated Net income per year $18.8 billion / 7,078,979,518 billion shares total after secondary offering = $2.65 per share net income per year; amount of net profits Fannie generates per year per share.

Secondary Offering priced at $38.79 per share minus $37.15 per share Intrinsic Value after secondary offering = $1.64; the new equity owners are buying $1.01 per share net earnings per year for $1.64 per share; $2.65 minus $1.64 = $1.01 per share.

Again, new investors are buying earnings power of the business, shareholders are not giving away the company in a secondary IPO without a price, Investors are doing just that buying into the company.

Market Cap 263 billion / 7,078,979,518 billion shares = $37.15 Per Share Intrinsic Value.

Treasury holds 4,603,542,119 billion shares x $37.15 = $171 billion.

Common Shareholders 2,475,437,399 billion shares x $37.15 = $92 billion.

Individual shareholders multiply number of shares x $37.15 = intrinsic value of your holding.

In my calculation no amount of dividends were added for the JPS. The JPS are on the books at a small amount of company equity in the amount of 19.1 billion. The JPS are not due any amount of accumulated backward dividends, every issue of JPS are Non Cumulative.

The advantage of the JPS is in a receivership; And receivership is not in discussion any longer.

Conclusion, the GSEs business model, simply there’s no better. So, Fannie Mae can issue, at a later date in time (no rush), Non Cumulative Preferred Stock replacing the higher dividend payment to the existing JPS at a lower payout rate. The JPS Shareholders receive Par Value with a New offering.

NOTE 1: The two companies sent to the Treasury $301 billion and of that $301 billion a portion of that money is an over payment of the principle and interest charge that should be a credit in cash to the company. During the Collins Case, that came before the SCOTUS, the calculated over payment was calculated in the amount of $29.5 billion between the two companies. An estimated approximate credit due to Fannie Mae $15 billion, in such a case the secondary IPO price per share would change in the example given above. In addition the warrants the Treasury holds should not be exercised, the Treasury has been paid in full, no reason the Treasury due 79.9% of the common stock of the company.

Note 2: The liabilities on the books of $4.3 trillion are backed by real property, it's not liabilities at all tangible assets.


The so-called cram down where the SPS is converted to common stock.

The Senior Preferred Stock held by the Treasury was not a perpetual equity investment in Fannie and Freddie at the moment in time when the companies were put in conservatorship. The misrepresentation or possibly the misunderstanding with the SPS is the fact the Liquidation Preference can be paid off by the companies and the SPS redeemed; And between both companies $301 billion paid to the Treasury more than enough pays the Liquidation Preference in full and cancels the SPS.

The pay down option of the Liquidation Preference and cancel of the SPS was worded in the documentation between the Treasury and the Companies at the time when Fannie and Freddie were put in conservatorship, This wording remains unchanged today. The misunderstanding came in the mind of investors when the two government agencies signed the 3rd Amendment between themselves taking all the NET WORTH of both Fannie and Freddie: AND by doing so the SPS has become a perpetual equity investment in the mind of many investors: AND RIGHTFULLY SO, for the monies paid to the Treasury has not be declared PAYMENT IN FULL.

The Facts remain the Liquidation Preference has been paid in full and the SPS should be cancelled.

IN ADDITION the 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 Liquidation Preference can be paid in full and the SPS canceled.
No 3 and No 4.

FACT: The Senior Preferred Stock can not 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

The CEO'S OF BOTH COMPAINES ARE APPOINTED BY THE TREASURY; and for this reason, we as Shareholders have no representation of our rights as owners of our companies.

FACTS READ THE CONTRACT.

No one from the company has sent a letter to the Treasury stating the Liquidation Preference is paid in full and the Senior Preferred Stock canceled. Instructions are written in the contract to do so.

WRITTEN IN THE CONTRACT STATES THE MONEY SENT TO THE TREASURY PAYS DOWN THE LIQUIDATION PREFERENCE AND WITH THIS PAY DOWN THE SPS REDEEMED.
Link: https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/FNM/SPSPA-amends/FNM-Fourth-Amended-Restated-Certificate-04-13-21.pdf

[Lite]

Based on past and current events, this situation was an instrument that allowed a power grab (money = power) by an Admin. During this overreach, an Unequal application of justice was and has been applied. How? Until an audit can be done, this was easily applied by utilizing siphoned billions (via net worth sweep) to provide the (aka - turbo) power to turn the mission of the GSEs ship on a dime. Back room deals keep it on its new course. A special committee will be needed to open the executive orders on the decision for the Net Worth sweep.

Can a jury be willing to take the first step to right the course of this misguided ship? Really what is at stake here: preventing Shareholders from making monies on investments that basically Govt implied that they would allow to trade {unencumbered}, or, the rights of individuals established by Constitution?

Thanks - asking for a friend.

[navycmdr]

Fannie Mae Appoints Cissy Yang Chief Audit Executive

10:08 am ET August 10, 2022 (PR Newswire)

Experienced Financial Services Executive Will Lead Fannie Mae's Audit Strategy

Fannie Mae today announced it has appointed Cissy Yang as Senior Vice President and Chief Audit Executive, effective September 12. In this role, Yang will be a member of Fannie Mae's Management Committee and will report to the Board of Directors and administratively to the President and Interim Chief Executive Officer (CEO). Yang will be responsible for leading the company's audit strategy, including internal controls, operational processes, and key risks assessments.

With 25 years of experience spanning both internal and external audit across the financial services sector, Yang has led multi-disciplinary teams and developed effective internal control and audit frameworks across large financial institutions. She will replace J. Douglas Watt, Fannie Mae's current Senior Vice President and Chief Audit Executive, who will retire in November 2022.

"We're pleased to welcome an executive with Cissy's impressive background and breadth of experience to Fannie Mae's leadership team," said David C. Benson, President and Interim CEO. "Her contributions will be essential to maintaining Fannie Mae's strong culture of corporate governance and rigorous internal controls. I also want to thank Doug for his leadership and contributions to ensure we have a high-performing Internal Audit function that executes on Fannie Mae's mission with a focus on safety and soundness."

Yang most recently served as Head of Audit for Investment Banking Fixed Income, U.S. Legal Entities, and Americas Compliance at Credit Suisse, where she held various senior roles. Prior to her time at Credit Suisse, Yang worked for PricewaterhouseCoopers and Arthur Andersen.

"I'm thrilled to be leading a critical component of Fannie Mae's business strategy and joining such a mission-driven organization," said Yang. "I look forward to partnering with my colleagues across the enterprise and working with the Board of Directors and management to drive Fannie Mae's ongoing audit and key risks assessment strategy in support of a safer and more effective housing finance system."

Yang holds a bachelor's degree in management from the University of International Business and Economics in China and a Master of Business Administration degree from St. John's University in New York. She also holds Certified Public Accountant and Chartered Financial Analyst designations.

[Donotunderstand]

yes
pennies a day or still

but seems we move up 20 cents on a base of 45 cents in about 5 weeks

hhmm

[ewtrader]

It would seem so or they are not following Constitutional Law

[imbellish]

Ran across this interesting substack post by Grey Mirror, don't have the full post as I'm not subscribed but the question of Humphrey's Executor has shown up a few times in the Collins case.

https://graymirror.substack.com/p/two-strokes-of-state

[ewtrader]

Thanks JOoa0ky much appreciated

[Fnmaman]

That is a secret, we can't tell you.

[PennMilitia]

14 Years worth of Lawsuits

And the Supreme just sits there and does nothing.

That should tell all of you exactly who they are and what type of games they like to play - worthless !

[Pecker9Wood]

There is nothing the Republicans can do as the government has fallen to the radical left. There is nothing you can do to get your shares back. Just look at the new kings cloths. The judicial system is compliant and no matter what the government says and how many words they use the GSEs have been very lucrative to the government, but you the shareholders have nothing to show for it.

[Robert from yahoo bd]

Penn, the growing proliferation of unelected federal agency officials known as the 4th branch of government have been dominating Americans lives and businesses since the Great Depression.

This group of Justices seems like they are beginning to rein in the 4th branch as these federal agencies become ever increasingly willing to dominate our lives by broadly interpreting Congressional statutes.

Case in point is the Net Worth Sweep. Here, under HERA, the FHFA believed that it had the power to nationalize the GSES and implemented the Net Worth Sweep because HERA allows the FHFA to exercise power "for the FHFA'S interest and/or the public it serves."

In WV v EPA, decided less than 60 days, the Justices in essence ruled that federal agencies cannot decide on Major "National and Economic" Questions through broad interpretations of statutes

Worth a read.