Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
They are preferred holders.
Are the values of these trusts on the balance sheets adjusted to account for the ownership percentage held by F or F? Or do F&F own essentially 100% of these trusts so it does not matter?
Orinally, the bank issue the loan and sold the loan to FnF.
Wouldn't one be safe to say that F&F "own" that $5T in mortgages since most of them show up on their balance sheets as "mortgage loans held for investment by consolidated trusts"?
Because the 10-K footnotes explains that they do.
You'll learn soon.
Technically F & F (not Fox and Friends!) own $5T in property backed mortgages.
They don't own the $2.9 trillion consolidated trusts. Your confusion comes from your lack of finance understanding.
Go back one more year and read about how they took off-balance sheet items and consolidated them which has confused many investors into thinking they own Trillions of assets when they don't. That's even a better read.
"Also do you want to deep dive into FASB accounting? I might be the .01% that knows as much as you."
Any day of the week and twice on Sundays, sport. Stop writing me for advice on twitter. You pleasantly ask me advice then come over here and spew your adolescence. You act as though I wrote HERA. lol. Just another emotional investor.
Just like every other time I heard a shareholder in bankruptcy say the same thing after shareholders were wiped out and the company restructured and IPO'd. Never happens ;)
It has more to say about your lack of knowledge. Do you know what a consolidated trust is?
I'm certain I know more about FnF's business model than 99.9% here.
FnF buy mortgage loans from loan originators (banks and non banks), securitise these loans in to MBS, then sell these MBS along with FnF guarantees for principal and interest.
The new entities can take on the debt. It could be added to the deficit if the new entities decide not to go public.
You don't understand the business, at all, if you believe that. I recommend you learn.
Scare? If presenting facts and evidence is scary to some, they're engaged in the wrong hobby. I didn't create HERA so naturally I couldn't possibly be blamed for it. By warning people about things they might have not known nor understood, I did quite the opposite of scare. Emotions have no part in investing. If your bases is emotional, sell.
You're on ignore.
lijianch,
When you talk about receivership, what will happen to $5T FnF MBS after receivership?
You've got the mind of a child.
Then, how will the preferred shareholders collect payment from receivership once wiped out? I know the process will pay preferred shareholders to some extent. Issue you a check or sell the new entity shares to you?
I disagree with some folks here to expect the government to "refund" the NWS profit. It is highly unlikely. That is why I used to choose the common stock over the preferred stock.
You're confused.
The option I know of that doesn't privatize Fannie Mae and Freddie Mac but gets them out of the control of government is the rule starting on page 109 of HERA. Upon recievership, a new entity(ies) will be created that bind to the existing charters of Fannie and Freddie and can take control of the existing assets and liabilities. Current shareholders will have no claim to the new entity(ies) and these entities can elect whether to operate as a private or public company by initiating an IPO or not.
Yes, that's a reasonable bet because essentially you're using preferreds as an insurance policy. That was the game plan I chose at one point. Nothing wrong with that plan.
I own preferreds. My only agenda is to profit from those preferreds. When Mnuchin states "I didn't say privatize", I've got a good idea about which option I'm betting on. Make your own decision.
G fee was 59 in 2015 NOT 10 basis point
Where you've been the last three days when I've given specific details of how that can happen? Search through my messages.
HERA stipulates that upon recievership, two entities will be created that are bound by the GSE's charters. Current shareholders are wiped away. From there, a new IPO of those entities taking it public with all the assets and liabilities of the old GSE's can be established. That is the exact definition to me of getting them out of government control.
The 30 Y rate has barely changed.
To me it means liquidation and new entities are created. Preferreds get paid, commons get wiped out.
Ginnie is government owned and operated, just like FnF used to be.
The difference between 10Y and 30Y is de minimus. Length isn't what you're going for in determining the risk free rate. The purpose is to find the best guaranteed rate available to measure opportunity cost against. 30Y rate should be used with every investment you analyze.
Risk free rate equals 30 Y Treasury bill.
Fundamental analysis isn't anything close to cut and dry. lol. Think you're confused on its definition.
Both options.
Ackman's 2014 valuation has been brought up by several. For some reason, it's caused much confusion. In the following, I separate the two companies and bring the valuations up to date to reflect the preferreds he erroneously failed to include and account for a recap.
First thing about this valuation that several people (nearly everyone I've heard talk about it on a message board) get wrong is the fact that the valuation is a COMBINED value of the GSE's. Two reasons we know this:
1. It says so at the top of the page,
2. The combined par value of the Sr. Pfd's is $2b, which is the amount discounted in the valuation.
Fannie Mae earned $12.313b in 2016 while Freddie Mac earned $7.815b. That means Fannie earns 61.18% of their combined profits while Freddie's take is 38.82%.
Using Ackman's "Illustrative Future Value", we can separate the two entities value by applying the above percents;
FNMA: $206b x 61.18% = $126.03b
FMCC: $206b x 38.82% = $79.97b
Next, Ackman failed to include a recapitalization scenario even though at this point the entire investing world knows a recap will happen. Instead, he simply combined the diluted shares outstanding of the GSE's that include warrants.
The final valuation for Fannie is $126.03b / 5.893b = $21.39 pps, and $79.97b / 3.234b = $24.73b for Freddie.
Now, let's add the Jr. Pfd's (since somehow he erred in doing that) and include a recap to the same scenario.
FNMA
$126.03b - $19.13b = $106.90b mkt cap
$80b recap / $106.90b = 74.84% recap weight ratio
100% - 74.84% = 25.16% total share weigh ratio
5.893b current shares out / 25.16% = 23.42b total shares required
$106.90b / 23.42b = $4.56 pps valuation
FMCC
$79.97b - $14.109 = $65.86b mkt cap
$50.75b recap / 65.86b = 77.06% recap weight ratio
100% - 77.06% = 22.94% total share weight ratio
3.234b current shares out / 22.94% = 14.10b total shares required
$65.86b / 14.10b = $4.67 pps valuation
It's easy to see the difference between Ackman's 2014 valuation and an updated valuation that properly includes a recapitalization as well as the Jr. Pfd's which was an obvious accounting blunder on his part.
Other assumptions Ackman made that were inaccurate: 60-100 basis point G-Fee's. Current G-Fee rate is 10 basis points. I'll let you figure out the other flaws he made.
One more thing about Ackman's 3 year old analysis, it called for a 7-10 year plan. That's a long time to wait to get paid. AND, he based his valuation off of a 60 basis point G-Fee. Today, g-fees are 10. Nowhere close.
Almost forgot to mention, his net income assumptions are $17b - $29b. Fannie Mae's net income is nowhere close to that. His valuation has nothing in common with rationality.
One last thing: he combined both companies in his valuation. The $47 pps stock price is the consolidated valuation of the GSE's, not for Fannie Mae. People have been warping his valuation for awhile.
I have little interest in Ackman. If you want to follow his lead, you should. I rarely agree with his valuations and they've gone horribly wrong over the last several years. In addition, his valuation you have access to is old and outdated. It's from 2014 and a lot has changed since then. Completely differerent capital structure.
I agree it's a hard sell which is why I still believe the liquidation or asset transfer option is still a real threat.
Because the value arrived at is my interpretation of what the value of the company is, I thought it'd be interesting to use Tim Howards assumptions from his website: https://howardonmortgagefinance.com/2016/10/25/getting-real-about-reform/
$10.6b NI x 10 PE = $106b Mkt cap
$106b - $19.13b pfd's = $86.87b mkt cap attributable to commons
$60b recap assumption
$60b / $86.87b = 69.07% weight of recap
100% - 69.07% = 30.93% weight value of total shares
5.893b current shares out / 30.93% = 19.05b total shares required
$86.87b / 19.05b = $4.56 pps valuation
*Note: The $60b recap assumption was pulled from his statement in the comments section of a software arrive on his website. I'll look for that comment later if anyone would like it. $60b was the minimal about he believed the recap should be.
In a previous post I was asked what I believed in which I replied $8 - $12 pps for the commons. Using Mr. Howard's assumptions it would seem my valuation is on the high side compared to him.