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About Watt and ending conservatorship.
I spent some time browsing around the FHFA web site. Wow - if you believed what they have on there you'd pay $20/share for F&F as is.
I did run across the pre-conservatorship numbers for capital requirements. Back in 2008 it was 34 and 38 billion for F & F respectively. It should be less now since they have shifted *some* risk to investors in their securities. I question that transfer - I mean, did they really get rid of risk by selling the mortgages but also providing insurance on them?
If the NWS ended and F&F retained say $2 billion each per quarter they would be fully backed in 4 or 5 years.
Right now they don't need any capital since they are backed by the $200 billion or so credit line from the FHFA. But for them to get rid of that credit line - backed by the senior preferred and warrants - they would have to do it over a few years as F&F recapitalize.
The reason I went to the FHFA web site was to see exactly who is the acting Board of Directors for F&F. It seems the people on the real F&F boards can only act at the specific direction of FHFA. So - who does that directing? Watt himself singlehandedly? Or some board at FHFA under Watt's direction?
Apparently THAT is the specific entity that has authority to end the NWS. More specifically to order the F&F board to declare or not declare a dividend on the senior preferred stock each quarter. At least that is how I read it.
As for ending the conservatorship - it does not look like FHFA can do that themselves.
Any alternative facts are appreciated!
Yeah it is off topic, but I bought FMCC first in 2007. Paid $27 per share but did get 75 cents per share in DIVIDENDS before they were suspended in 2008! I bought Freddie because they seemed more solid and the dividend looked better. HAHAHAHA
Kept doubling down all through 2008 and 2009 since it was obvious that they would soon be hugely profitible. And added Fannie to the mix. I forget my lowest priced ones but they were below 30 cents as I recall. At that price I could buy tens of thousands of shares for not a lot of cash.
Who does not love a hundred bagger! Doh! On the downside not so much fun.
Shares in these companies are nothing more than wallpaper and trade on novelty value only.
This brings up a point... is it possible to get paper shares issued for these stocks?
Many times when I ride a company stock down to zero I wish I had gotten a paper certificate so at least I could hang it on the wall to remind me what could have been.
I do have a few paper certificates in defunct companies and some are quite attractive. They even have a value on eBay!
I assume that if we are not allowed to discuss preferred shares here - that includes both junior preferred and senior preferred?
We should start reporting any posts touting preferred stock as off topic, which it is.
If we do that then we need to also report any posts regarding FMCC as off topic too since this is a FNMA board.
I do not recommend either being reported or moved elsewhere.
Just to be sure - my interpretation of the word "notwithstanding" is to mean regardelss or despite. So it says that d supercedes a, b and c.
In plain english:
Despite what it says in amended section 3.2 a, b and c - and thanks to F&F letting us steal everything they have - we won't also tack on a Periodic Commitment Fee to what they already owe us.
--
So only the Senior Preferred dividend is payable each quarter - and only if the "board of directors" says so.
I *think* we agree?
It does point out that my reading is correct.
Thanks!
Hmm... yes - the amended section 3.2 does talk about the Periodic Fee, but farther down in 3.2(d) it says:
Notwithstanding anything to the contrary in paragraphs (a), (b), or (c) above, and in consideration of the modification made to the Senior Preferred Stock effective September 30, 2012, for each quarter commencing January 1, 2013, and continuing for as long as paragraph 2 of the Senior Preferred Stock remains in form and content substantially the same as the form and content of the Senior Preferred Stock in effect on September 30, 2012, no Periodic Commitment Fee shall be set, accrue, or be payable."
It is my understanding that no Periodic Commitment Fee was ever set or demanded.
But I'm just going by the wording of the documents... as we know the rule of law and written, signed contracts do not seem to apply with F&F so who really knows?
I just looked at the third amendment and it says "For each dividend period from January 1, 2013 holders of Senior Preferred Stock shall be entitled to receive, ratably, when, as and if declared by the Board of Directors, in its sole discretion, out of funds legally available therefor, cumulative cash dividends in an amount equal to the then-current Dividend Amount"
So - it says if declared by the board. Who is the board now? Watt? If the "board" decides to not issue a dividend - it seems this says there will be none given.
The third amendment then goes on in detail about what the "Dividend Amount" will be - but it seems that does not matter if the "board" decided not to issue a dividend in any quarter.
Am I reading that correctly?
I think you are thinking about preferred stock that is ISSUED at a discount by the issuing company. As was originally said:
The legal definition states:
Discount stock is a stock share that is issued for less than par value.
The F&F preferred were issued at par originally. If they are later resold on the open market at a discount, that has no effect on F&F nor does it decrease their obligation to someday redeem them at par. (if they can!)
They're on the balance sheet because GAAP accounting rules states that if you own at least a controlling interest in the shares of the company, you must consolidate their assets and liabilities even though you don't own them.
That is good to hear, and makes sense.
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?
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"?
I don't think running them through those trusts takes the liability for loan losses (real and mark-to-market) off of F&F. I believe they act as "insurer" for losses on those loans - right? I'm still working to figure out whether they own those mortgages or consolidated trusts, or just own the risk.
More proof that I know nothing of what I speak, so read my posts as if you were listening to an explanation by Spicer, and that the "bull" in my name may have nothing to do with market optimism.
I am always eager to learn something new!
Shanna, they bought their stocks, they knew what they were getting into. I say, let ’em crash.
Technically F & F (not Fox and Friends!) own $5T in property backed mortgages.
Their pre-liquidation value is the current "mark to market" price of those mortgages. IE - what you could sell them for on the open market. That price fluctuates based on the current prime rate, 30 year bond rate, valuation of the dollar, etc, etc. F&F are allowed to retain enough cash each quarter to be sure all debt could be paid off including bonds and junior preferred and senior preferred if all of those mortgages (and other assets) were sold.
Now - if suddenly $5T in mortgages floods the market I would bet that they would have to be discounted to sell in a reasonable amount of time time, and to account for that influx of debt raising interest rates. Think of this like QE in reverse.
Not to mention another housing downturn would also decrease their market price just like it did when this whole debacle started. Or a big jump in interest rates would decrease the market value of those fixed-rate mortgages. I don't understand why everyone focuses so much on the markdown they would take on those deferred tax losses when a markdown on $5T in mortgages due to rising interest rates would be MUCH bigger...??? Don't they have to adjust the value of those assets every quarter? Or did that mark-to-market waiver back in 2012 or so eliminate that requirement?
Bad news is that I do not believe the current value assigned to those assets takes into account a "fire sale" discount, or another housing crash or rising interest rates. So those situations would wipe out pretty much all the junior preferreds in a liquidation - leaving the gov't with some debt to pay off out of their pocket.
Because of all this - I doubt the gov't would choose to go the total liquidation route.
Surely the stock price will bounce back.
In response to:
i picked a bad day to quit sniffing glue!!!
Finally an easy question.
"Question! What is the logic behind dwindling the GSES to 0 cap reserves by 2018 when the nws was put in place?"
While they were pretty sure F&F would die soon, just in case they lingered they wanted to be sure congress would act to squash them.
So the dwindling down to zero in 10 years was like lighting a 10 year fuse. If nothing else was done - F&F would blow up, either making congress do something about it, or the "problem" would just go away.
Those working to insure shareholders get nothing would not understand the difference between longs and shorts if you spent an hour with them in front of a white board. They would still think you were talking about DT's fingers.
"it's not a crime to make money on investments"
Someone needs to remind all of those who can't stand to see the shareholders make anything - that whatever the common shareholders get, the US gov't gets 4 times as much with the warrants.
It's a win-(4 x WIN) situation.
I think the relative value of the common vs the preferred is an indicator of the investment community's opinion as to whether F&F will be released and recapped - or liquidated.
When opinion swings more in favor of release and recap... common go up. When opinion swings towards liquidation - the preferred shares go up. It's the recap/kneecap ratio.
The value of these things has very little to do with fundamentals, profit, assets, etc. It is nearly all an opinion about what politicians and judges will do in the future.
My understanding is that all preferred shares are treated equally. So they all should receive the same percentage of face value in a liquidation. However the price varies quite a bit from series to series even taking into account that some have a face of $25 and some are $50.
My suspicion is that there are some hoping that the suspended dividends for preferred shares might someday be given out by a court decision - so the ones with more accumulated unpaid dividends may be worth more. The theory is that the net worth sweep is a dividend on the senior preferred - and based on the wording of the preferred shares they get their dividends as long as the company gives out any dividend to any class of stock.
My recommendation as to which preferred to buy - I think getting unpaid dividends is very unlikely, so I just buy the cheapest ones. Maybe I'm missing some important detail? Also be careful that some of these are very lightly traded with a huge difference between bid and ask, so never, never do a market order!
Also - my understanding is that until the preferred shares are paid at 100% the common shares get zero in a liquidation. The "preference" is complete, not a percentage.
Sorry to be so prolific today... I kept quiet most of the last 7 or 8 years.
My understanding is the gov't paid nothing for the warrants yet. Their exercise price will be one one thousandth of a cent per share. So their additional investment would be a few thousand bucks.
But - I am very confident in my investment. I will buy more if it drops more than 50% from here and I will start selling when things triple from here. Within that range I'm continuing to hold.
I got the majority of my common shares around 45 cents, although I did have a bunch I bought too soon that cost me $7. ouch
And hey - those warrants expire in 2028 so at worst we need to wait just 11 more years for something to change.
I was simply assuming things stay near where they are in a post-NWS world. About 1 billion shares, about 10 billion in net income per year, no dividends given out. So equity accumulates at around $10 per common share per year ongoing. Given the current price - even without any recovery from the courts earning $10/year on a $3 investment is not bad. Even if the warrants get executed it's still $2 per share.
Oh - and what if the gov't decided to forgive the $117 billion fannie owes them? Since they own 80% of the company through the warrants it would only cost them $23 billion.... a cheap price for a fully funded company. Oh wait - they would take it back in the next NWS. Doh!
Of course there are oh so many variables. I know everyone counts the various assets and liabilities differently, but I think they are already discounted per mark-to-market rules. I'm taking the balance sheet as something close to accurate. But when you are talking $3 trillion even a 1% error can wipe out even the preferred shareholders. I assume that is why they sell for 20 cents on the dollar. Plus it's dead money until something happens. I've been stuck in this thing since 2008 having only sold enough to get back my initial investment.
In some ways a liquidation TODAY may end up returning the best value... congress can pretty much only screw up the value when they get involved in the future. To be safe I've rebalanced so I'm about half in common and half in preferred.
It does not help that for most of congress the #1 concern is that investors do not make a profit.
Crud - I try to proof-read my messages... but in my previous post - in my opinion the retained value going to shareholder equity if FNMA is released and not liquidated would be about $10/share/year, not the $1 I stated.
Minor error. Whats $10 billion between friends?
Donot;
If you pull up the year-end 2016 10-K from the FNMA web site for example, you just need to look at the consolidated balance sheet on page F-3. (about page 204 in the pdf)
It shows the total assets exactly equal to the total liabilities, although there is some shareholder equity that ended up going to the most recent net worth sweep.
The good thing for taxpayers is they show the "loan" from the feds as a liability (listed as "senior preferred stock"), so even when their net worth drops to zero they will be able to pay that back.
The good news for holders of preferred stock is that they also have the face value of all of the preferred shares (about $19 billion) listed as a liability, so if they were released or liquidated today there would be enough left to pay their full face value of $25 or $50.
The kinda good news for common shareholders is their balance sheet is balanced, so if they are not liquidated, then once released any future increase in net worth from profits will increase the shareholder's value - roughly about $1 per share per year at today's pace.
All of this assumes no benefit from any court proceedings - just the simple liquidation of the company or the ending of the NWS.
Any corrections to my reading of this is appreciated!
I may have missed the discussion about this - but if the courts give any relief to the common or preferred shareholders, would any compensation be given to the CURRENT shareholders, or would the compensation go to the shareholder of record on the date the damage was incurred?
I know some out there are hoping for shareholder relief for the significant loss in value from actions back in 2008-2013, and some hope that the preferreds will get paid past due dividends.
Yes - I know the preferreds are not entitled to dividends in years when no dividend was declared.
Just trying to figure out if there is any long-shot residual value that has been carried along, or are only the shares I bought before 2009 eligible? I'm trying to estimate a value when their net worth goes negative and things go into liquidation.
Thanks - Craig
All of the net worth sweeps to date have been counted as dividend (interest) payments on the $187 billion that was "loaned" to F&F for the bailout.
At the end of 2018 the plan is to have the net worth of F&F at zero.
My question is - is that zero net worth taking into consideration the $187 billion they owe? Or will their net worth really be negative $187 billion at the end of this year?
I've always assumed it would be negative $187 billion.
DPHIQ shares cancelled but still are trading ?
I didn't sell these before the deadline and now they show in my Schwab portfolio with a numeric symbol like my other dead stocks. But the price is changing as if it were still trading - latest quote was $.0401, up just a bit today but earlier it was up more.
Why would anyone offer 4 cents? And how do I see these trades? I can only see my holding value change and divide by shares to see the real-time quote. Schwab does not allow me to get quotes or trade this stock online.
Thanks!