Nothing wrong with being a vulture.
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Bullish for Housing?
Fannie Mae just recorded their largest ever profit and has reached Net Zero on their bailout! This is $3 trillion worth of the housing market at stake.
http://finance.yahoo.com/news/fannie-earns-6-5b-4q-130002054.html
Joe, please send me an email and I will invite you to the private board for discussion.
Joe,
Who is bidding on IMPHP? It's up over $1 today.
Please take a moment to sign this petition.
http://www.shareholderrespect.org/take-action/
"
Fannie Mae and Freddie Mac shareholders deserve respect. They have been silenced, used, and abused by the federal government.
When the government initiated the conservatorship of Fannie Mae and Freddie Mac, shareholders lost their voting rights, dividends on preferred and common stock were suspended, and annual shareholder meetings were canceled.
The government sponsored enterprises (GSEs) have returned to profitability, but their shareholders with zombie stock remain without rights or remedies, and with no opportunity – as given to bailed out Citi and AIG shareholders – to share in the recovery of value that is likely for Fannie and Freddie.
Many of the GSEs’ shareholders are small investors, who were told for years that their investment was the safest one after U.S. Treasury bonds.
Legislation currently in Congress - the PATH Act (H.R. 2767) in the House, and the Corker-Warner bill (S. 1217) in the Senate - does not address how to deal with Fannie Mae and Freddie Mac shareholders."
Protect the mortgage market and private capital.
Sign this petition on behalf of GSE shareholders.
http://www.shareholderrespect.org/take-action/
Sign Nader's petition for GSE shareholders as soon as you can.
http://www.shareholderrespect.org/take-action/
This is very pertinent to your investment in AGNC. Fannie and Freddie issued $1.57 trillion in MBS last year alone. This represents 73.8% of the market. If the government can nationalize and socialize the entire mortgage market, then they can pretty much do the same thing with any business and any property in the United States.
We need at least 1,000 signatures to be taken seriously.
Sign Nader's petition for GSE shareholders.
http://www.shareholderrespect.org/take-action/
This is very pertinent to your investment in NLY. Fannie and Freddie issued $1.57 trillion in MBS last year alone. This represents 73.8% of the market. If the government can nationalize and socialize the entire mortgage market, then they can pretty much do the same thing with any business and any property in the United States.
Interesting that Tim P had to comment at the bottom about being misquoted.
NOL Poison Pills and the future of a company ->
Author suggests that enacting a poison pill proves that a company has future profits to protect.
http://seekingalpha.com/article/1973451-j-c-penney-why-preserve-nols-if-there-arent-future-profits?source=yahoo
Thanks.
I wonder if this means anything for all the companies adopting poison pills.
Can someone enlighten me on why adopting a poison pill is a sign that the company will return to profitability?
I think I get it, but want to hear from others.
Playing Devils Advocate
I might make some people mad with my questions. Please humor me.
1. If class 9B creditors received 7.32%, why would 10B creditors receive any more than that? How much more could 10B creditors receive without triggering a lawsuit?
2. WAMPQ -I'm looking at the WMIH board and see some conversions. It looks like the preferred stock holders got 1 WAMPQ = 19.8005825 WMIH This was a $1000 preferred stock. The conversion at today's WMIH price is about 4.87 cents on the dollar or $48.70 per $1000 face value. That values the lehman shares at $1.21 and is in line with my view that they won't get more than the 7% given to some of the lowest debtors.
Please change my mind.
Okay...
$55 billion x 34% x 50% valuation = $9.35 billion
Is there cash to drop in there?
Would this be shared with any of the remaining debtors?
What are the total assets available right now?
$10 billion in NOLS?
I'd say they are worth $1.7 billion as a DTA. (half of 34% times the NOL)
What other assets would be contributed to a new org?
Doesn't this just mean the CTs would be treated as a debenture as opposed to a preferred? It's still a subordinated interest.
Carbon Sequestration
Who can give me an opinion on this?
Will this work in the long-term? Are we effectively subsidizing Chinese coal plant production through EPA regulations in the US?
Will coal prices rebound over time?
Mortgage originations and refinances are on hold. I think MSRs will gain value with the Fed Taper.
???
I wonder if any insiders are buying or selling here.
I believe those insiders that sold for a tax-loss must wait another ten days to buy back in.
Three questions for the board.
1. Under the Common Securitization Platform (CSP), will mortgage g-fees become a uniform security that can be traded among market participants? If so, couldn't an asset be recorded to reflect the discounted cash flows of this asset, similar to Mortgage Servicing Rights (MSRs)? Each GSE has a multi-billion intangible that they could record under this scenario.
2. Is the CSP plan moving forward?
3. Under IRS Section 382, could the Deferred Tax Asset (DTA) valuation be called into question by the execution of warrants for 79.9% of the common stock? Additionally, if a shareholder like Ackman were to increase his common stock ownership percentage beyond 10%, could this trigger an event under section 382 that would make these assets worthless?
I believe the Treasury cannot execute the warrants without devaluing the DTA. Therefore, they must be auctioned to the public markets with no single holder receiving more than 9.99% of the company.
Maybe this rule is only for non-governmental owners.
http://www.law.cornell.edu/uscode/text/26/382
This is probably the reason for the sweep.
Couldn't they assign the warrant an execution price and then auction them?
Movie quote from my favorite movie, Family Man. I hope to have this conversation with my wife soon.
Jack: "I'm going into arbitrage, honey. It turns out I have a knack for it."
Kate: "Jack, what are you talking about?"
Jack:"I'll be making twice what I make now, plus a hefty bonus.
That's just to start."
....
Kate: "Are you out of your mind?"
Jack:"I don't think so."
If they follow the RBS model, a tender offer while prices are depressed makes most sense. This would benefit all classes of shareholders because some of the preferred could be redeemed for less than RV (boosting potential book value to common). This would be voluntary of course. It would be followed by dividend resumption at a future date.
If you look at tender offers like this, the offer price sets a floor for the stock. NBG-PA is a good example too. Tender offer was made last June.
http://www.marketwatch.com/investing/stock/NBG.PA/charts?symb=NBG.PA&countrycode=US&time=8&startdate=1%2F4%2F1999&enddate=1%2F10%2F2014&freq=1&compidx=none&compind=none&comptemptext=Enter+Symbol%28s%29&comp=none&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=3&style=1013
This would explain why the preferred are trading pari passu.
"I'm going into arbitrage, honey." - Nick Cage
Its difficult to keep track of all of the lawsuits. In 2009, I think Obama had suggested a Financial company tax to pay for the bailouts. I think this was the real world alternative.
It appears to be. I'm using my secureid and multiple computers. Nothing is working.
My brother cannot log in either.
Is anyone listening to him?
What type of advisor?
I saw this stock listed as a bottom performer for 2013. That peaks my interest.
This will be how the pump $300 billion in new equity capital into these companies. The pump was primed in 2013.
All those hedge funds and mutual funds holding GSE common and preferred will be reporting their annual results right now. And that means money will be flowing in. What do you think they will do with all that excess cash? There is still easy money to be made here.
top performing mutual funds in 2013
http://news.morningstar.com/articlenet/article.aspx?id=624557
is there is a list like this for hedge funds?
Anyone have an update on this lawsuit?
So, the answer, I believe is that Fed Tapering only has an effect on the interest rates offered to mortgage borrowers and the rate of return given to investors. If Fannie and Freddie hold loans or MBS in their portfolio, the value of those loans and MBS is negatively affected by rising rates, but I believe this is why they use derivatives.
I'd add to this and say also...
If the 100% profit sweep were to end, the uncertainty around GSE fees being retained by the company might end and they may have to record an asset on the books, at a discounted rate to reflect this value.
Again, someone better versed on fair value accounting may need to speak up here.
As an accountant, I think the answer is that something is missing here from the GSE balance sheets.
When a company services a GSE mortgage loan, under fair value accounting, they hold something called a Mortgage Servicing Right. This is a discounted cash flow that represents the net fees to be received for servicing the loan. A model is used to compute the fair value. Go to NSM, SGM, IMH, or any other mortgage servicing company and you can find information on MSRs in their SEC filings. When interest rates rise, there is value gained on the MSRs because prepayments drop and other changes in the model. The value of those rights increase.
I don't think the GSEs value Guarantee Fees using a discounted cash flow approach. Someone who is better versed in fair value accounting could probably tell us why.
In my email inbox today from Inside Mortgage Finance....
"Banks Cautiously Raise MSR Values in Third Quarter
By John Bancroft
Despite an increase in primary market mortgage rates during the third quarter of 2013, banks and thrifts were cautious in raising the valuations they placed on their mortgage servicing rights, according to a new Inside Mortgage Trends analysis of call-report data.
Banks and thrifts serviced $4.77 trillion in mortgages for the benefit of other investors, typically as a result of securitization. As an industry, they assigned a fair-market value of $48.4 billion for these assets, a ratio of 1.01 percent.
That was up from a fair value/MSR ratio of 1.00 percent in the second quarter of this year. Primary market rates for conventional 30-year fixed-rate mortgages rose about 42 basis points during the third quarter, a fairly significant increase that suggests slowing prepayment speeds and – all else equal – increasing value in existing MSR.
For more on the story and a ranking of 100 banks by the fair value of their MSR portfolios, see the new edition of Inside Mortgage Trends"
I disagree. I think they won't execute "those warrants" but they may execute some type of warrant for a value of $20 or something.
I think they should have written "whoopsie" after this statement. That would really sum it up.
Home construction hits fastest pace since 2008
WASHINGTON (MarketWatch) — Construction on new U.S. homes soared in November to hit the fastest pace since early 2008, signaling that the housing market’s recovery is shaking off rising mortgage rates.
Housing starts leaped 22.7% in November to reach a seasonally adjusted annual rate of 1.09 million, with surges for single-family homes and apartments, according to the U.S. Department of Commerce. Economists polled by MarketWatch had expected overall housing starts in November to hit a rate of 963,000.
Builders and buyers are becoming accustomed to the new price environment, and, as long as jobs keep showing healthy growth, the housing market’s rebound will also continue, analysts say.
http://www.marketwatch.com/story/home-construction-hits-fastest-pace-since-2008-2013-12-18?siteid=yhoof2
I found his email at the bottom of this presentation.
http://www.mismo.org/files/TrimesterMeetingInformation/January2013/Jan2013SummitKeynotePresentation_Ugoletti.pdf
Maybe you all could spam his inbox with questions.
KBW: Mortgage volumes to fall further in 2014 • 1:17 PM
A continuing absence of refinancing activity could have mortgage origination volumes off as much as 30% in 2014, say KBW's Bose George and Jade Rahmani, even as purchase volumes rise more than 10%. Their forecast of $1.15T in total activity next year is $50B less than the MBA's estimate, and against about $1.8T in 2013.
For the mortgage sector: Decline earnings from originators and title insurers, stability for the servicers, and increasing earnings for the insurers.
The mortgage insurers - RDN, MTG, ORI, ESNT, NMIH, GNW - will benefit not only from the rise in purchase activity, but from an FHA continuing to cede more market share to the private players.
The team is also bullish on owners of MSRs like Home Loan Servicing Solutions (HLSS) and New Residential (NRZ -0.3%), but neutral on Ocwen (OCN +0.7%) after a big run this year.
KBW also continues to believe the common stock of Fannie (FNMA -0.4%) and Freddie (FMCC +0.8%) is worthless and reform of the GSEs isn't coming until at least 2015.
https://groups.google.com/forum/#!forum/impac-mortgage-preferred-stock
If you want to see more details, request an invitation.
Impac is a few Qs away from recognizing a large DTA. In September, they created a poison pill to prevent anyone from buying too much common stock. A change in ownership would cause them to violate IRS section 382 on NOL carryforwards. The NOLS are close to $489 million representing a possible DTA of more than $170 million. They have 8.8 million common shares. I believe they could recognize at least $90 million of the DTA based on 2012 operating earnings of $13 million.
IMPHO has a liquidation preference of $25. The company has equity value of $28 million and total preferred stock liquidation value of $51.7 million. So, the first $28 million covers about half the liquidation preference. (No stated book value per common share.)
I'm doing some research on Mortgage Servicing Rights (MSRs). They appear to be a hedge against rising interest rates. They are also discounted at more than 10%. Impac is growing this section of the balance sheet by originating mortgages and retaining the servicing rights.
The book value of $28 million, $27 million in MSRs, and $90 million DTA would result in at least $145 million in future book value. Every $1 of MSR retained, I think will also boost the DTA. In a year, the Servicing line of the P&L has jumped from practically nothing to $1 million in net Revenue per Q.
For more on MSRs, see NSM or SGM. They recently IPOed and have tremendous growth rates.
In comparison to Fannie and Freddie, Impac is a small fries. I think that is why nobody is bothering with the preferred. Total market capitalization of IMPHO and IMPHP is about $5 million.
Mortgage Servicing Rights (MSRs)
I'd like more information on MSRs and their impact on future earnings. For instance, if a company discounts their MSRs by 10.5%, is this essentially an estimate of cash flow for the next 30 years that ends with a $0 residual value?
It seems to me that after 7 years, the MSR has paid for it's initial cost.