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It's only a matter of time before a class action suit is launched in favor of common shareholders claiming the same 5th Amendment violation.
No doubt. I can't say what the fate of FnF will eventually be, but I can confidently say that the government will always have a role in the US housing market. Housing cannot exist efficiently without it. Too many times private capital has either folded in the face of an economic disaster or the private money just isn't to be found in enough volume to sustain the industry.
A few nickels up or down in either direction doesn't matter much. I still think we run on Q2 earnings. If you're worried about losing your position then flip this thing on volatility. If you're a betting man, hang on until August. In any event, play with what you can afford to lose. IMHO...
Well, even stronger evidence then.
Corker-Warner plan suggests 10% private capital upfront, before the government backstop kicks in. That's where I got the numbers from, given FnF have assets totaling $5 trillion.
What's a half-trillion dollars difference? ;)
Here's a history lesson:
"During the Great Depression, as borrowers defaulted on mortgages en masse and banks found themselves strapped for cash, President Franklin D. Roosevelt and Congress created Fannie Mae in 1938 in order to buy mortgages from lenders, freeing up capital that could go to other borrowers. Although Fannie Mae began with just $1 billion in purchasing power, the agency helped usher in a new generation of American home ownership, paving the way for banks to loan money to low- and middle-income buyers who otherwise might not have been considered creditworthy."
http://www.time.com/time/business/article/0,8599,1822766,00.html
Bottom line, if Congress ever tries to completely eliminate FnF, banks will be forced to keep mortgages on their balance sheet. Therefore, their capital will decrease significantly. What does this mean? Sky-high interest rates, which a majority of the country cannot afford. Housing would stall significantly and likely completely, followed by another recession. Never mind that nearly $500 billion of private capital would need to be raised to backstop the mortgages, prior to a FnF wind-down. Highly unlikely to happen anytime soon given the climate of this fragile economic recovery.
Exactly. If I were the gov, I'd let it run up in price then cash out the shares for a huge profit. Only way to get that huge price spike is to end c-ship and let it trade on the market at fair value. Once they receive dividend payments equal to treasury draws (likely q3 this year), they'll do just that.
Huge wall at 1.60. Again, probably limit orders being executed on the round number like somebody else had mentioned previously.
And there it is...balance is restored to the FNMA board. Welcome back Apophis.
Let the pumpers pump. Unfortunately, complaining about it isn't going to change anything. If you spend even 1 day on this board reading the posts, you can easily figure out who is blindly pumping and who has realistic opinions, thoughtful insight, and alternative valid strategies.
Most of us here are guilty for pumping to some extent. Aside from the constant bashers, most of us have vested interests that make us want to root for FnF with every uptick. Stay calm, devise a strategy worth sticking to, and most importantly, listen to yourself.
I'm not a technical analyst or even much of a trader. But simply look at the 3-month chart. This thing is mirroring that March run-up and sell off pretty well. I see this getting beat down to the low 1.30s over the next few days, then we trade sideways and upwards until the end of July to about 1.60s. Upon earnings, we take off for the third run to around $8.
I think we're in the beginnings of the "second dip" phase that occurred on April 03-12. It doesn't look like a huge dip on the chart but was ~30% decrease. If you believe algorithms are controlling this chart, alongside news, then either flip some shares now or hold on tight until August.
I could very well be completely wrong. This message is pump-free. Just my personal opinion.
Thanks obit et al. I fully understand why the Treasury was in favor of passing that 3rd amendment, but why did DeMarco agree to it? I know that his only duty as GSE conservator is to return them to a solvent condition--nothing more or less.
Knowing that enactment of the 3rd amendment was in direct violation of his duty as FHFA director, why would he still do this? Was it for political positioning? Money? Did he really think this was the best move to make?
I think a subpoena of all of DeMarco's financials would be quite interesting. There has to be some conflict of interest for him to agree to that 3rd amendment. Otherwise, it just doesn't make sense.
Thanks for the fantastic continued analyis obit.
I have a question for you, that has never made sense to me:
If the FHFA, DeMarco, and FnF knew that the upcoming years would be highly profitable, why did they ever agree to the 3rd Amendment of the PSPA (i.e. the dividend sweep)? For it to have been passed so close to the profitability period (within 6 months) has never really made sense.
I know that the intention of the 3rd Amendment of the PSPA was to prevent FnF from making Treasury draws just to pay their dividend obligation. But to agree to such drastic measures just doesn't seem like sound business practice.
I'd be interested to hear your thoughts/comments on this.
Beautiful buying pressure within the last 5 mins. Good indicator for tomorrow!
The ask is relentless today...
Bids stacked at 1.71. Let's GO Fannie!
For those of us unable to watch the CNBC interview, can anybody briefly sum up what was said? Thanks in advance!
Looks like strong support at 1.68
OMG. Look at those buys!
Woah, 174K buy at 1.64!
Ummm, it's a holiday? EOD profit-taking?...
That ask wall at 1.68 is UGLY!
Going green! Watch for the EOD flips though...
I think she started a little early!
Ask looks pretty thin. Looks to be a QPH!
Go Fannie Go!
Next intraday mini-run starting. Hang on!
Crazy buying pressure today! That's what we've been needing.
Wow, look at those buys! 1.70s will print soon.
My brain is going to explode watching the L2.
Here come the 10% flippers...
Damn you ATDF!!!
Hey rain,
I totally agree with you. These Q2 earnings could be HUGE if Fannie and Freddie both realize their remaining DTAs.
Freddie has $30B DTA and Fannie has about $8B DTA remaining. With a really exceptional quarter (which we're all expecting business to be more profitable (not speaking DTAs of course)) both could hit net-zero plus. Just looking at the numbers, I'm almost convinced that Freddie will do it. Both will get there by Q3 no doubt.
Could be an interesting last 5 mins...
Citigroup-Fannie Mae news headlined on google finance right now.
ATDF is constantly crushing this thing today at the ask.
Big buys rolling in. 1.50 falling.
I think on that date (5/29) they settled a suit that was seeking 3.5B. The news today is release of the settlement details. Someone correct me if I'm wrong...
Just hit 1.51, up 7% on less than 1M volume....
That initial suit was seeking 3.5B, so we got about 27.5% of the value sought. Therefore, should we expect about the same percent return on the total $200B, which is $55B?
The SPSA was initially set up for FnF to pay treasury quarterly dividends that equalled 10% of their outstanding liquidation preference. The fatal flaw with that setup occurred when FnF were unprofitable, so they were actually borrowing more money from the treasury just to pay the dividend.
Seeing this as unsustainable DeMarco was forced to make an amendment to the SPSA (Aug 2012) allowing for the dividend sweep only in periods or profitability (i.e. no profits, no payment). This was great because it stopped the negative borrowing loop. Therefore, I wouldn't say the dividend sweep is unlawful. However, one does have to question why FnF made that amendment on the verge of these huge profits.
IMO, once the balance "owed to treasury" is "paid in full" there will be a push to exit cship. In the meantime, enjoy trading and taking profits along the way. Rinse and repeat until near the end of the year...
It's not hype. These are all reasonable possibilities based on reported facts. None of us have any idea what the fate of FnF will be. You obviously believe they will be permanently shuttered based on your own conclusions gleaned from available data--an assumption that is entirely believable. Other people feel differently based on their own analyses of the data.
It might seem like a long-shot bet that the GSEs will emerge unscathed (and likely is) but its a risk I'm willing to take. I don't have a huge position in FnF like some here, so if I lose on that bet, then I lose. It's only money and I'm relatively young--more will come along.