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.
Thank you, navycmdr.
I think it's about time, our active Fannie days are coming to an end. Ever thought of that?
Fully
Hi RickNagra,
if Chares' sources are right once, then an end of the NWS comes along with a devaluation of the SPS, because otherwise it is not 100%.
Calabria's job is safe until the Supreme Court decides otherwise, or Judge Atlas follows the order of the 5th circuit and executes the "entry of judgement". Calabria could then appeal against this.
Mnuchin now has a lot of people around him, who express their wishes. That is quite obvious.
In order not to disturb the markets, Mnuchin only has to ensure the line of credit. This is also practicable outside the conservatorships. If Fannie is contractually assured, for example by a Consent Decree or 4th amendment, that this maybe declining line of credit will be available for a fee on certain conditions, it will be difficult for Biden to reverse it without breaking the contract and causing chaos in the secondary housing market. By the way, the secretary of the treasury can withdraw the credit line at any time - always has been.
GLTY
Hi folks,
It is not easy for me to find the right words right now. Despite all the euphoria I have had since last night, I must still warn you: Never use money on the stock market that you may still depend on. This also applies to so-called 100% bets. Because these do not exist. Also not with Fannie!
So, you are warned!
But to those who have been speculating for years on a positive outcome for Fannie, I would like to advise the following URGENT:
Hold your shares as tight as you can now! Fully believes he can see the finish line.
But decide for yourself. I found this a few hours ago. It's from the 375 page FHFA capital rule document. First the text, then a few words about it from me:
"E. Transition Period
An Enterprise will not be subject to any requirement under the final rule until the compliance date for the requirement under the final rule. The compliance date for the regulatory capital requirements (distinct from the PCCBA or the PLBA) will be the later of the date of the termination of the conservatorship of the Enterprise (or, if later, the effective date of the final rule, which would be 60 days after publication in the Federal Register) and any later compliance date provided in a consent order or other transition order applicable to the Enterprise. In contrast, FHFA contemplates that the compliance dates for the PCCBA and the PLBA will be the date of the termination of the conservatorship of the Enterprise (or, if later, the effective date of the final rule), so as to provide additional authority to FHFA to restrict dividends and other capital distributions during the period in which the Enterprise raises regulatory capital to achieve compliance with the regulatory capital requirements. FHFA expects that this interim period could be governed by a capital restoration plan that would be binding on the Enterprise pursuant to a consent order or other transition order."
https://www.fhfa.gov/SupervisionRegulation/Rules/RuleDocuments/Enterprise%20Capital%20Final%20Rule%20for%20Website.pdf
Page 22
Here is my summary of the essentials:
- The FHFA stages the capital requirements. The regulatory requirements are to apply as soon as the company is released from the conservatorship or as soon as all the orders set out in a Consent Decree are fulfilled.
- The PCCBA and PLBA, on the other hand, should apply in any case as soon as the conservatorship ends. These relate to the regulatory influence of the FHFA on dividend payments and salaries. The FHFA therefore wants to be in control of the dividend payment and the level of salaries - i.e. probably no dividend and no salary increases - until the companies are adequately capitalized, in accordance with the orders in a Consent Decree.
- The FHFA speaks of a transitional period, which describes the time between the end of the conservatorship and the end of the Consent Decree. Accordingly, the conservatorship ends formally as soon as a Consent Decree is agreed and signed.
- A Capital Restoration Plan, which Fannie must draw up itself according to HERA law, could regulate this transitional period in a binding manner. This is what the FHFA "expects".
Folks, does that sound like being released from the Conservatorship by a Consent Decree?! Why does the FHFA even describe the time between the end of the conservatorship and the fulfillment of all Consent Orders if it does not take this route?
When I read it this way, it does not sound like a possibility, but like a plan! But make your own opinion...
GLTA
love the way you think ...
Hi Ripcord01,
you are right: TCCA fees go directly to the treasury. And that is a lot of money. This shows what a 10 basis point increase in g-fees means. But the $1.9 billion was generated in the last nine months, not in a quarter. On page 16 of 146 you can find the following:
"Base guaranty fee income related to TCCA ... (r)epresents revenues generated by the 10 basis point guaranty fee increase we implemented pursuant to the TCCA, the incremental revenue from which is remitted to Treasury and not retained by us."
"1,976 - For the Nine Months Ended September 30,2020"
https://www.fanniemae.com/media/36571/display
GLTY
Topic: Final Capital Rule
Hi folks,
well, Fannie needs a few billion more. But: Step 1 of 3 is now done:
1. determine capital requirements
2. 4th amendment
3. release from the Conservatorship by Consent Decree
Is this the starting signal now? - I think so. Well, I have a slight tingling sensation. The boys are probably getting down to business.
As a reminder: Calabria's predecessor Watt had also proposed a capital rule, presumably under pressure from Trump, after he had done nothing for 4 years. But he never finalized it.
If Calabria now adapts the G-Fees to the capital requirements, everything is in balance. And in terms of ROE, it is necessary.
Calabria has been keeping an eye on the G-Fees and has already increased them (twice?), as well as on the Return on Equity (ROE), which plays a central role in a capital raise. This is because ROE plays a major role in evaluating the economic viability of any company. And a company that does not operate cost-effectively is not "sound and safe" either.
G-Fees, these are the fees that Fannie charges for its main business, insuring the securities MBS that it sells to investors. They are Fannie's main regular source of income, set by Calabria on a regular basis.
ROE is the ratio of net profit to shareholder equity. For example, if Fannie has $200 billion in its Shareholder Equity section in the balance sheet, with an annual profit of $20 billion, that is a ROE of 10(%).
One can say that Fannie should have a ROE of 10-12 due to its business model. And Calabria knows this, because he has been around long enough to know this. I was able to observe this clearly in the media about a year ago. And the introduction of a new fee as "compensation for corona losses", which Fannie has been charging since this November, will give our sweetheart an estimated annual profit of over 20 billion dollars. Here one thing fits into another and looks planned to me.
Note: Investors look at ROE to assess whether the company is well positioned for the long term. And if that is the case, they are interested in the ROI, as the potential return on their investment.
GLTA and Stay Strong
Hi altruism,
yes, that was Citi offering a conversion, not the Treasury. This is a big difference, especially for the timing of the offer. For my part, the JPS holders are welcome to receive an offer once the SPS is deleted. And no JPS holder would convert his shares before that. Kthomp 19' "do everything at once" will not come like this.
GL also TY, my friend
Hi Robert from yahoo bd,
I think Howard is wrong here. The 5th circuit remanded the case to Judge Atlas at the District Court for Entry of Judgment. So there is no enforceable judgment yet, and Calabria would remain in office until Biden brings the case back to court. That is, if the Supreme Court does not decide the Collins case, as I described in my last post here.
However, I would be pleased if obiterdictum would comment on this. Just to be on the safe side...
GLTY, Fully
Calabria is currently still non-terminable. This means that Biden cannot fire him without cause - thus not at all, as long as Calabria keeps to the laws.
So Calabria is still in office until 2024, if not
- the Supreme Court ruled that the FHFA is unconstitutionally structured just because of this clause in HERA that the director cannot be removed without cause.
- the district court, where the case was originally filed, passes judgment.
Judge Atlas' district court has been out since the Supreme Court accepted the case. And I don't think she will ever have anything to do with the case again.
The Supreme Court would also be out if the plaintiffs withdrew their case or if the case became meaningless. The latter would be the result if Mnuchin would waive the value of the SPS - by a 4th amendment.
The Supreme Court has granted 2 petitions, which will be heard in the Oral Hearing on December 9th.
1. Collins wants to know whether the structure of the FHFA is unconstitutional because he hopes that the value of the SPS will be deleted. If Mnuchin were to invalidate the SPS himself, the case would certainly be withdrawn by Collins. It costs a lot of money...
2. Mnuchin wants to know if the value of the SPS is enforceable, if the plaintiffs have a claim at all. This petition would become meaningless as soon as the plaintiffs no longer sue due to the devaluation of the SPS.
Where there is no plaintiff, there is no judgment. Calabria would remain in office if he and Mnuchin wanted to. Because the 5th Circuit decided at the time that the FHFA was unconstitutional, but remanded the enforceable judgment to Judge Atlas of the District Court.
This is the crucial part of the opinion:
"The court REVERSES the judgment as to Count IV and REMANDS that claim for entry of judgment that the "for cause" removal limitation in 12 U.S.C. § 4512(b)(2) is unconstitutional.
http://www.ca5.uscourts.gov/opinions/pub/17/17-20364-CV2.pdf
Page 4 of 123 in the reader
Here is the Mnuchin petition. There it is not about the constitutionality of the FHFA, as you can read on page 2:
https://www.justice.gov/brief/file/1213796/download
So Calabria has at least a few more months to protect Fannie from "Biden attack", that is: for a release from Conservatorship by Consent Decree, which cannot be reversed. And should the Collins case no longer be dealt with by the Supreme Court, he still has about 3.5 years left in office. I don't know how long it would take for Biden to have the constitutionality of the FHFA reviewed by the courts, but I suspect that's years. At least he would be rid of the Collins case, which is in its final judicial phase.
GLTA, Fully
Hi kthomp19,
I think you've memorized it wrong when you write:
Thank you, curious999.
Hi curious999,
to get a Tenbagger, you have to be in the commons. This is not for the faint hearted.
GLTY
Hi jcromeenes,
no, this is not official. They're not stupid, are they?!
GLTY
Hi RumplePigSkin,
the chances for an upcoming final are quite good. So I have to be right here with you.
If Biden wins:
- 4th amendment expected
- Release per consent decree imminent
GLTY
Hi robertus,
we just have to wait a little longer. The Gordian knot will then magically untie itself. More like weeks than months...
GLTY
Hi Rick,
you got me. But I'm not John.
Grab on tight, the end of the conservatorships is near.
GLTY
Well observed, Guido2. Once again!
GLTY
Hi trunkmonk,
If you sell your car, you'll have more money afterwards. But you're not richer that way. Your net worth is the same.
In times of crisis, liquidity is king. Fannie sold some assets like MBS to get the most liquid asset, cash on hand. That's good.
I don't think this was a step towards reducing the footprint, because Fannie didn't use the money to pay off liabilities.
GLTY
P.S.: False hopes are not helpful! I try to always stay with the truth and to inform all of you conscientiously.
We need Heisenberg to set things straight. Not Walter White man.
Hi chessmaster315,
The following can be read in Fannie's new quarterly report:
"Cash, cash equivalents and restricted cash increased from $61.4 billion as of December 31, 2019 to $128.7 billion as of March 31, 2020. The increase was primarily driven by cash inflows from (1) proceeds from repayments and sales of loans, (2) the sale of Fannie Mae MBS to third parties, and (3) the issuance of funding debt, which outpaced redemptions, primarily for the reasons described above."
https://www.fanniemae.com/resources/file/ir/pdf/quarterly-annual-results/2020/q12020.pdf
page 54 of 122 in the reader
GLTY
Hi Bostonsesco,
the cash change is interesting. But I don't want to give you false hope at this point: The $80 billion is an asset, not net worth and not shareholder equity.
Total assets minus total liabilities = net worth = shareholder equity
GLTY
Hi navycmdr,
Fannie Mae cash and cash equivalents as of March 31, 2020:
$ 80.463 billion ($ 80,463 million)
Fannie Mae cash and cash equivalents as of December 31, 2019:
$ 21.184 billion ($ 21,184 million)
https://www.fanniemae.com/resources/file/ir/pdf/quarterly-annual-results/2020/q12020.pdf
page 62 of 122 in the reader
GLTY
Hi donotunderstand,
That's for sure. But the United States is a rich country. And the housing market is lucrative. I'd rather feel sorry for the people than Fannie. She's always going on and on.
I can already smell the end of the crisis in a few months. I'm not sure about the long-term effects on the economy. Rich countries usually benefit from crises like this. But the world is becoming more and more interconnected.
GLTY
You're welcome, robertus.
I spend less time with Fannie these days. Waiting for the Capital Rule, the Supreme Court, a settlement, a 4th amendment and the release per Consent Decree towards the end of the year. Did I forget something? Sure, my dividend. Coming up a little later...
GLTY
Thanks, Warhead, I'm glad to read that.
GLTY
Let's talk again in four years, when Calabria presents his capital rule...
Is that rule still expected by the end of May?
Hello friends,
greetings from Germany, where we are slowly reviving the economy and public life. We calculated the lethality rate of Covid-19: It's just 0.37%. That's not even twice the rate of influenza.
And now to Fannie's Q1:
Fannie's net revenues were still very high:
Q1 2020: 5.655 billion dollars
For comparison:
Q1 2019: 4.930 billion dollars
Q4 2019: 6.054 billion dollars
Like the big banks, Fannie and Freddie have dramatically increased their loan loss reserves in anticipation of possible future loan defaults. This pushed Fannie's Q1 2020 net income down to $476 million.
As a reminder, these reserves are not lost money, but will be turned back into company earnings as soon as the crisis is over or normal reserve ratios return - in other words, the calculated credit risk posed by homeowners will return to normal.
By the way: Loans in forbearance do not fall into the category of loan defaults. This means that we currently have a special situation, as there are more deferrals than ever before due to the "Cares Act". The massive reserves that FnF and the banks are currently building up are on a 'voluntary' basis.
Fannie has not paid a cent of dividend to the Treasury since the "Letter of Agreement" of September 27, 2019 between Calabria and Mnuchin. Fannie may now retain its profits until it has accumulated 25 billion dollars in net worth. It already has 13.9 billion dollars. In the next quarter or two, Fannie's net worth may not increase, but its reserves...
Fannie's numbers are the be-all and end-all. And they're still very strong. You just have to know what to look for.
If the crisis were to get worse and last as long as Fannie actually needs its reserves to meet its obligations to its MBS holders, that money would really be gone. As a result, the probably upcoming capital raise would have to bring in a few billion more, which would further dilute us common shareholders. Fannie cannot crash completely because of its 120 billion line of credit rescue package. Everything else would crash first!
Should the crisis end in the next two quarters, we common shareholders would have gotten away with the horror. Like I said, Fannie's business is doing great. The borrowers just have to pay as they did before the crisis. The loan delinquency rate is still stable. But it's a bit of a paper shuffle, because the current loans in forbearance are not included in it.
GLTA
https://www.fanniemae.com/resources/file/ir/pdf/quarterly-annual-results/2020/q12020_release.pdf
Fannie, Freddie and the Corona Crisis
Bless the one who has Fannie and Freddie!
The USA have two towers of strength - Fannie and Freddie. Not only do they provide the country with a healthy housing market in good times. Especially in times of crisis, their systemic importance becomes very clear: With their almost unlimited liquidity, they not only keep the housing market going, the house builder in his own four walls, but also support the financial markets. In our globalized world, there is currently no company that is even remotely as important!
FnF now grant payment deferrals to borrowers or adjust existing loans to avoid foreclosures. They continue to provide the housing market with liquidity. And their $4 trillion securities continue to enjoy an implicit government guarantee, making them as safe as US Treasury bonds.
While it may be of interest for banks to hold foreclosures, FnF would be cutting their own throats in the process. This is because their capital requirements and thus their existence depend heavily on property values. And they have no other significant sources of income that could benefit from falling property prices. Apart from liquidity, this is the reason why they were created by the government. And that is the reason why they still exist and will continue to exist in the future.
Because if the American housing market collapses, the USA will plunge into a deep crisis and with it the entire global economy. This can never and never will be left to private financial institutions. The model of the (two) government-sponsored enterprises is leading the way here and gives politicians decisive influence without having to declare a national emergency.
Can FnF go bankrupt?
Any company can go bankrupt. But FnF would be the last. The Treasury and also the FED will do everything to prevent this. The two companies still have about 200 billion dollars in bailout money at their disposal. And for the time being, the companies are only threatened with book losses, which will be reversed when the markets return to normal. It will have to come very hard for the "Twins" to incur permanent losses from their operating business. Moreover, in recent years the companies have specialised in risk transfer transactions, which account for a good quarter of their business volume and allocate the first 10% of the loss to the contracting parties.
Will FnF be nationalized?
Will Green Party build nuclear power plants?!
And even a new president cannot nationalize FnF as soon as they are released from the Conservatorships by Consent Decree. Calabria can do this practically anytime if Mnuchin plays along to keep the line of credit up.
Of course, in principle, any company can be nationalized - at fair market value.
Has anything fundamentally changed in Fully's old analyses and forecasts?
No. Consent Decree will come at the end of the year. Perhaps the presumed capital raises will be carried out later. But that could even be in the interest of the common shareholders.
Is the coronary crisis perhaps even an opportunity for FnF and its shareholders?
We now have a real stress test situation. If FnF masters this, which I have no doubt about, it will have a positive effect on their image and create confidence in the companies. It also shows how high the capital requirements actually have to be and which screws still need to be tightened. Calabria will take a close look at what is happening before he brings out his Capital Rule.
Stay healthy, Fully
To all impatient people,
the last time it said "very soon", it only lasted a few days.
" I expect we will have re-proposed the capital rule very soon. Our goal is to publish the final rule by the end of 2020."
“FHFA’s capital rule will be a critical mile marker. It must be in place before Fannie and Freddie can go to the market to raise capital. I expect we will have re-proposed the capital rule very soon. Our goal is to publish the final rule by the end of 2020.” Director Calabria pic.twitter.com/fcCxnJm7Kp
— FHFA (@FHFA) February 24, 2020
Hi bcde,
unfortunately, yes, which is why I am of the opinion that the entire framework is an Unconscionable Contract, which obviously has the goal of destroying FnF and bleeding it dry with a 10% dividend that cannot be suspended. Consequently, the FHFA itself described this as a "death spiral" in court.
The FHFA used accounting tricks (DTA treatment etc.) to force the companies into bailouts that were so high that the 10% dividend then due was as high as FnF had never ever earned in one year before.
Unsealed documents prove that it was the goal of those responsible to destroy FnF and its shareholders.
GLTY
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=153993824
No, kthomp19:
Hi kthomp19,
I am not sure if you are right about that:
Hi Potty,
on request I have simply summarized the article by Dexheimer and added a few comments. Tomorrow I will read the original letter to see what happens when a third source, i.e. me, reproduces a secondary source.
Personally, I estimate the probability of an SPO to be higher than that the companies will recapitalize over 5-6 years by retained earnings alone. But Calabria and Mnuchin have kept all options open so far. Hence the option of a 5.5 year contract for the FHFA advisor. By the way, the FHFA advisor has quite different tasks than helping with an SPO. Reorganizing the capital structure means more than just the equity structure. Much more.
The (first) SPO, perhaps in 2021 or 2022, could then be simultaneously accompanied by a conversion of the JPS into Commons, at the same price. That's what Moelis suggested. This would then also correspond to the fair market value of the commons, which should be sounded out by then. Wait and see!
Fury or Wilder? I guess Wilder knocks the Brit out...
GLTY
You're welcome, stink stack.
Thanks Guido,
also for your tireless efforts! Definitely a top 10 Fanniegater!
Hello, folks,
I wrote this on my German home board. Maybe some of you might be interested:
Mnuchin has now replied to the questions of the Banking Committee. He had to, because unlike Calabria, the Treasury Department is subject to the Freedom of Information Act(FOIA) and is therefore forced to answer questions from congressmen (to a certain extent). And what did he say? Nothing!
Almost everything that reporter Dexheimer writes in her Bloomberg article is also in Mnuchin's reform plan. I couldn't find Mnuchin's letter itself.
- Mnuchin wants to work with Congress to create an explicit guarantee for FnF. Cause for that, it needs the Congress. But if that doesn't work out, a written commitment from the Secretary of the Treasury to help the companies in case of emergency could also be made. The market needs this kind of security.
Folks, Fannie already has a congressional/legal charter that promises aid from the Secretary of the Treasury in return for Fannie's "support for affordable housing" and "serving peripheral areas". But Mnuchin wants money for that. (Not because he is greedy, but to counteract Moral Hazard. Or others should also be able to get a charter, which also needs a law.) For that, the guarantee must be explicit. Maybe he is somehow able to rewrite the already existing line of credit in such a way that Mnuchin can demand money for its supply in the future. This has been in the media talk several times. But I doubt it is possible, because it contradicts the meaning of the Charter and would render it ad absurdum, at least in part.
- Furthermore, Mnuchin writes that no decision has yet been taken on how the taxpayer will be compensated for the help he has given so far. With this he addresses the treatment of the SPS and possibly also the warrants and once again leaves everything open.
- Senator Warner was glad to have received an answer and is looking forward to future cooperation, as always.
- Now Dexheimer writes that the letter comes from Mnuchin and Calabria and that both think that a capital raise is necessary. But one could also recapitalize by retaining the profits.
- Calabria also addresses the question of "Consent Decree" and writes that this would not necessarily mean that the Conservatorships would end earlier.
The latter was a clever statement. Because it calms the hardliners of our opposition. And the statement is also correct - even if it leads onto the wrong track. Because a release by Consent Decree means that the companies are released from the legal clutches of the Conservatorships, but can be put back into them at any time as soon as they do not fulfil their Consent Decree agreements. Otherwise not! Calabria now says that the Conservatorships only end when all agreements/milestones are reached. From a technical point of view, this may be correct if Calabria designs the two Consent Decrees that way. But in practice this means: Once outside, always outside - unless the companies mess up. No one can shake it - not even a President Bloomberg. That is a fact. And that is what Consent Decree is all about. But, please, don't tell anybody...
That Mnuchin and Calabria apparently wrote the letter together was clever too. Because now Calabria has his peace again...
Happy and peaceful weekend to you all!!
https://www.bloomberg.com/amp/news/articles/2020-02-20/fannie-freddie-may-be-freed-with-treasury-backstop-mnuchin-says?__twitter_impression=true
2 weeks till I am well-rested...
Still 2 weeks hibernation to come.
Sometimes I take a quick look outside.