Fannie Mae Series Q Preferred 6.75% (FNMAI)

[NewJerichoMan]

He started quoting his favorite American poet, Andrew Dice Clay:

Little Boy Blue....he needed the money!!

[taintedfud]

i'm here. all we need to do is find rosie, mbers, and that goober guy.

i forgot ebano for comic relief.

what caused Kristallnacht?

[rosen62]

Quieter here...

[44centsAKAchoccake]

Anyone home?

[NewJerichoMan]

It certainly is.

[sidedraft]

Mr. Market is saying that the preferreds, any of them, is the place to be.

[The witness II]

commons are red.
http://ih.advfn.com/p.php?pid=squote&symbol=fnma

[sidedraft]

Most all Fannies are green, none are red. Most are up double digits, wonder what's up.

[sidedraft]

Fannie Mae is overall pretty green, I hope it means something.

[sidedraft]

On September 7, 2008, the Federal Housing Finance Agency, as Conservator of Fannie Mae, announced that Fannie Mae would not pay any dividends on common stock or on any series of outstanding preferred stock (other than the Variable Liquidation Preference Senior Preferred Stock, Series 2008-2).
Additionally, the Senior Preferred Stock Purchase Agreement prohibits the payment of dividends on all common and preferred stock (other than the senior preferred stock) without the prior consent of the United States Department of the Treasury.
For reference purposes only, the dividend rates on Fannie Mae’s outstanding preferred stock for the first quarter of 2013 are as follows:



http://www.fanniemae.com/resources/file/ir/pdf/stock-info/dividend_statement_rate_reset_123112.pdf

[sidedraft]

Maybe, just maybe....

[sidedraft]

Just treading water.

[sidedraft]

Looks like a trend to me:

[sidedraft]

Has anyone seen any good news? This is unusual:

[sidedraft]

A little better, now 78¢.

[sidedraft]

But it is slow in coming.

[NewJerichoMan]

http://online.wsj.com/public/resources/documents/WilsonCenter5.22.12.BlueprintforHousingFinanceReform.pdf


Page 12, Step 3 of Millstein's proposed 9 Step Plan for "Going Private" with FnF -

"Initially, the existing Treasury Preferred should be converted into a non-cumulative preferred stock."

Check

This has always been an all or nothing play with jr. preferreds. Financially, FnF just got a sweetheart deal. Politically, the rhetoric just got more omnious. Hard to predict the future but the risk / reward still makes it a great play.

[NewJerichoMan]

But the usurious 10% divvy goes away now. Some quarters FnF would draw so they could pay that divvy. The vicious cycle is ended.

This merely speeds up the timeline.

Either FnF go into receivership (all stockholders get zero) or they pay their debts and are privatized (all classes of stock have value).

[sidedraft]

All that Treasury wants is every penny of profit:

http://www.usatoday.com/money/economy/housing/story/2012-08-17/fannie-mae-freddie-mac-bailout-deal-change/57115448/1

[NewJerichoMan]

No more kicking the can down the road. The US Govt appears to be speeding up the FnF process to a resolution.

Either FnF will go into receivership at some point in the future or they will go private.

0% or 100% payout.

Zero or hero play.

Place your bets.

[NewJerichoMan]

Probably.

FnF still need a sea change of thinking from the political forces.

[sidedraft]

I wonder does Fannie Mae have to fully pay back Treasury before giving out any money to it's own preferreds?

[NewJerichoMan]

Closed at $2.00 on incredibly low volume.

Two quarters in a row Fannie has not needed to draw. They are demonstrating that they are a viable going concern.

We sit at about 8% of the par value.

[NewJerichoMan]

Fannie posts a $5.1B profit. From $1.20 to $1.80 in fairly short order and low volume. Sort of expecting better. Down here in the OTC market, nobody seems to care about illiquid shares with an unknown future.

[NewJerichoMan]

Freddie posts a $1.2B profit. No teasury draw. Hello $2 per share!!

[sidedraft]

Yes Sir, creeping right along, now $1.55.

[NewJerichoMan]

From $1.20 to $1.40 today. The creep up has begun!

[NewJerichoMan]

FNMAS appears to be gapping up to FMCKJ. Won't be long before other preferreds, like FNMAI, bridge up as well.

[NewJerichoMan]

First Horizon Get Downgrade

http://in.reuters.com/article/2012/06/28/idINWNB197420120628

The reason this is important is the reason they got downgraded. They are gonna settle on their putback lawsuit with FnF. They have $883M in claims against them. From the article:

"FHN plans to use $250 million of this charge to increase reserves for mortgage repurchase claims from government-sponsored entities (GSEs) Fannie Mae and Freddie Mac--the rest relates to litigation issues."

Suck it First Horizon!! Whoo HOOOO!!

[NewJerichoMan]

There are many scenarios as to what can happen. I'm of the opinion that we'll eventually follow the Citi and AIG models. With Citi and AIG they didn't call the preferreds but rather converted them to common shares.

[sidedraft]

Calling the preferred would be expensive, but nice.

[NewJerichoMan]

FMCKJ has been blowing up for the past 10 days or so ($2.15 at the moment, same $25 redemption, much higher divvy). FMCKJ and FNMAS are usually the first two movers. They are the most liquid $25 preferreds. When a move happens, it's those two first, then the other $25s, then the $50.

Could be seeing a nice upswing in the coming days.

[sidedraft]

I'll take a change please.

As a barometer, FNMFO is up $50 today to $3850.

[NewJerichoMan]

FnF (Fannie and Freddie) will likely post draws in Q2 because of derivative losses related to record low interest rates. But all other facets of the business should be humming. Q3 might be great. But in the end, to climb from their respective holes, it'll take a political sea change.

[sidedraft]

Given this:

http://www.fanniemae.com/resources/file/ir/pdf/quarterly-annual-results/2012/q12012_release.pdf

Maybe something good, this way comes?