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All I'm saying is that I genuinely want to hear what are the other alternatives for getting Fannie out of gov control.
Clearly, no one knows what exactly Steve means. I'm not sure he has a concrete plan himself.
No you cannot undo all the fnma debt issuances out there. Then you have to unwind all the underlying mortgages. This is not a possibility.
An option will have to have some likelihood of probability.
Totally agree.
How do you mean treasury to enter the market? As a newly formed company owned solely by the treasury?
If they put fnma into liquidation what will happen to the outstanding debt? The reason they left the zombie equity is bc they don't want to liquidate fnma bc by doing that the debt will have to be counted into our nations debt, potentially affecting our nations credit rating.
I think he will have to end the NWS first before he does that. No one will buy equity of a company with no share of net income under the current NWS arrangement.
Well, in order to get the company out of gov control he has to let the company be a normal company again. That means ending the conservatorship. And profits do have to be shared with equity holders.
How would you suggest the company getting out of government control without ending the conservatorship and therefore ending the NWS?
I am not sure I can come up with an alternative.
You can only have a brand new entity of the company goes through restructuring. The common equity then would be wiped out but so will the warrants. The warrants will also expire worthless. The warrants is not with the new entity.
If he dilutes common equity like crazy, his 80% is worth less also. Why would he want to do that? He is interested getting the most to fund other projects trump has in mind.
For this company's equity to go to zero the company will have to liquidate. In that case all fnf debt will go on us government balance sheet potentially affecting US credit rating. And no new fnf debt can be issued and the housing market will come to a halt as fnf still have the largest housing finance market share. These are the risk for the US government and economy if fnf equity goes to zero.
I think this is why the latest earning report left the wording a bit softer on the payment to treasury. They have a few months to decide.
He can get money also by recapping fnf and selling the government's stake. He can use his spending needs as an excuse. As a businessman this makes sense. Why destroy value when you can sell it for money?
Thank you. That's sounds fair.
So the dual will soon by 2018 if not sooner be depleted of any equity buffer because of the NWS.
And this news article suggests that there are higher priorities in congress that fnf reform may not be on the table until mid 2018.
Wordings of the press release on earnings seems to suggest that there is a small question mark on paying the NWS for the quarter bc the new accounting may deplete fnf's reserve even faster. So will the new treasury do anything here?
This ruling suggest that congress can write any law it wants with no consequences.
This ruling suggests there may be a case of unfair dealing or fiduciary violation. As it deserves a retrial. Perry is advocating for preferred. Pershing can still file their own case for common.
Not sure about judge sleet's case, state law vs federal law. Even though the company may have agreed to a deal that violates the state law, the government may argue that Hera prevails and make it a supreme claim.
Then we have judge Sweeney continues with discovery and uncover damaging info on the government's case which may help unfair dealing and fiduciary violation.
Did I miss anything?
There is no progress on these yet. Is there a court date for the Delaware case?
Isn't there still another case at Sweeney's court?
So can they appeal to the Supreme Court right away? Or they need to wait until the case is finished with judge lambert's court?
I thought it was supposed to be tomorrow.
Aug2 and aug4
This proves no death spiral!
Why wasn't that addressed at oral argument?
I think the judges will not send the case back for retrial. It seems they will address all issues at this court.
I think it would be unthinkable for the government to taken the companies private while retaining the 80% ownership. Don't they have to consolidate the debt in that case?
Why do you think the court is asking these questions?
Why? In that document, it also says allow fnfs to rebuild capital in 2014-2015. That did not happen.
It says right there in the filing.
How is 246 denominator? That's the total dividend paid so far. By your way of calculation, the return would be ~17%
I agree with you.
But my question remains to be: how do they come up with a 7.5% if no repayment of principal? If all 246bn is dividend, then the return should be way higher.
But the document must in detail provides how dividend is calculated and if any return of principal be allowed or early redemption of the preferred shares based on the 2nd amendment? Clearly, the third amendment throws everything out of the window. But it seems again they are trying to have it both ways.
Since they took in many times return greater than that 10%, due to third amendment, they would have to use the amount exceeding that 10% for principal repayment.
Then all those penalty to the litigations against the banks got taken by fhfa which should have flown to the fnfs if fhfa were not created.
The government has always insisted that the ~246bn received is dividend, not repayment, which would include principal. How do they now come up with this 7.5% return?
Reporting will probably come out tomorrow.
That's the thing up without so much volume. Maybe people are waiting to see the actual filing of the denial order.
Thank you. This is very helpful
I see. Sorry I cannot access the actual order. Only saw some of the quotes.
The judge gave them another 2 weeks.
I thought they give ruling between 6-9weeks from 18 April.
By mid June we should expect the appeal decision... Where would pps be?
Is this a joke? How would fmcc be able to report 2017q1 earnings when we are only in 2016? This carney guy gets funnier a time goes on. And shame on wsj for publishing it.
The Mbs sold by fnma is asset backed paper, the underlying collateral will pay the bond holder through a trustee, not fnma. Fnma is a platform that buys the loans from the banks and package these Mbs which are sold to investor.
How is that unconstitutional?
For sure because of public policy and charter, fnf have advantages over banks. But fnf also allow certain segment of the public to own a home. You can argue that maybe some of those people should never had been able to get a loan in the first place. But that's the balance of having advantage and having to provide some public "service".
Owning a home is imbedded in the American culture. And 30 year mortgages make it possible. I think taking it away would be quite hard for the public to accept also.
Creation of fnf is result of a government policy in the 30s. Banks had a chance to offer competitive products before fnf were even set up. But the products they offer were expensive for the consumer and limited in scale. It was very hard for Americans to own a home. Can you imagine having to pay off your house in 5 years? Those were the terms prior to fnf.
If 30 year mortgages are no longer available, what would happen to the housing market. I am not sure the general public understands the ramifications of liquidating fnf or closing them down.
Both debt consolidation to national balance sheet and unavailability of the 30 year mortgage will surely have huge negative impact on US economy, housing market, etc. it would make 2008 like a walk in the park.
In fact, the reason fnf were created with such charter was because there was no appetite for any banks or insurance companies to offer 30 year mortgages at reasonable interest rate to the public.
The proposals also do not address cyclical nature of investing. When the market is calm and there is strong confidence, the appetite for risk sharing bond at libor+ small spread is likely to be strong. In hard times when there is little confidence, they may have to offer the risk sharing bond at a steep interest rate. Who would pay the interest rate? The homeowners! But if interest rate is too high then people cannot afford to buy the houses. That means reducing demand in housing stock and making a downward cycle worse. The purpose of creation of fnf was to have stability and affordability in the housing market.