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Ok, great. And after you replied back to JPM reasserting that JPM was indeed the trustee, did they reply or just redirect you again to the previous lawyers? Just trying to make sense of the email chain. Perhaps others here would find the info useful.
In any case, thanks again for your hard work in fighting for the rest of us...
Hi cotton,
Again, I'd like to echo the thoughts of others and express my thanks.
I'm curious as to what the trustee (bnym?) had to say in response to your email. Clearly JPM thinks that the claim is not a guarantee claim and that they are not the trustee, as they directed your question elsewhere by suggesting you ask the trustee.
Thanks again!
Lurker here... has anybody analyzed this new docket (#46304) released 9/13/2014? The email chain in the document is very recent (last week), so this is new discussion between JPM, BNYM, and a CT holder.
http://dm.epiq11.com/LBH/Document/GetDocument/2518784
It seems that somebody is fighting for CTs payment on Oct 2nd. While JPM is stating that claim 66462 is not a guaranteed claim.
I usually keep up with the discussion on here but was out of town this weekend. It could have been discussed and I may have missed it. Thanks in advance!
Hi Obit. I don't have any practical experience in legal issues. What does the discovery schedule do? Will it layout exactly who will be deposed (if any), documentation requested, etc? Is it a detailed or generalized timeline for how the plaintiff's expect the discovery process to proceed? Does this information become public knowledge immediately or does it remain confidential? Do the resulting discovery documents/testimony also become public knowledge immediately?
Sorry, that's a lot of questions but I bet a lot of folks on here are wondering the same thing. There's nobody better than you to clear these things up for us. As always, many thanks in advance!
I think the March 20th court date that everyone keeps mentioning is only a meeting for plaintiff's to submit a discovery schedule, which will basically outline the who and the means by which they seek discovery (deposition, documentation). It is essentially the beginning of the process. I'm not sure when items discovered are made available to the public.
Beautiful. Let's see if that 4.40ish resistance level now becomes support...
edited: I guess not!
Thanks obit. I'm on my mobile and unable to post the entire article. Good looking out!
News: Losing Fannie and Freddie a Terrible Idea
http://m.huffpost.com/us/entry/4975985
Crawford, while you may be correct in interpreting Nelas response to "what Ackman thinks about recent reform news" and the inability to "say it on public television", I interpreted this differently.
I thought it was said in jest. If you lost hundreds of millions of dollars in one week due to predicted reform news and HFT algos, what would you say?
First thing that comes to mind is: "Holy (insert curse word here)!" As such, you could not say that on TV.
IMO...
Yes, there was a gap. But it was closed.
Right on navycmdr! If you watch the video it's pretty obvious that Lew completely avoids Toomey's questioning by trying to deflect back to previous questions on Ukraine. The violation of the rule of law is blatant. He's likely embarrassed by the actions of his predecessor (Timothy Geithner) but is trying to save face for his institution (Treasury).
I think that Congress knows they violated the rule of law in regards to the net worth sweep. Recent rhetoric by Crapo, Warner, and others are alluding to the courts having ultimate say in what their legislation can accomplish or legally do. For this reason alone, I do not expect these reform bills to move anywhere until the courts have outlined what is legally allowable and how/if shareholders should be compensated.
News: Fannie Mae, Freddie Mac Deal Raises Troubling Issues
by Mark Melin | March 13, 2014
Toomey putting the screws to Lew at Senate Budget Committee at 1 hour 12 min mark. Questioning the rule of law.
video link
http://www.valuewalk.com/2014/03/fannie-mae-freddie-mac-deal-issues/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+ValuewalkBusiness+%28ValueWalk+%C2%BB+Business%29
At issue is a contract the government signed and then later rescinded without involvement of the other party to the agreement, an act that would be illegal in the private sector
When the US Senate Banking Committee announced plans to replace Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) with a new government backed program, shares of the stocks dropped dramatically, down nearly 15% on Wednesday and off more than 30% the day previous as rumors had been swirling. While the measure had bipartisan participation from the Obama administration, the bill’s passage is uncertain. If it does pass, Congress must then decide on “fair” treatment for investors.
Fannie Mae Freddie Mac FHFA Federal National Mortgage Assctn Fnni Me (FNMA)
The bill might not get attention before political leaders start to consider elections, according to a Bloomberg report. Once it does receive attention there is no guarantee that the program will receive a warm reception in Congress. A Democratic Senate aide was quoted in the report saying leadership is currently unenthusiastic about legislation that would eliminate Fannie Mae and Freddie Mac.
“It’s possible, but it’s certainly not probable,” Mark Calabria, a former aide on the Senate banking panel who now directs financial regulation studies at the Cato Institute, was quoted in the report saying. “You’re looking at maybe a 10 percent chance of a bill getting to the president’s desk.”
Toomey seeks “fair” treatment for investors, hits raw topic of validity of government contract
In regards to “fair” treatment for investors, Sen. Patrick Toomey (R-PA) is pushing a contentious issue on the floor of the Senate. Speaking with US Treasury Secretary Jack Lew, Toomey touched on what could be a key issue.
At issue is a contract the government signed and then later rescinded without involvement of the other party to the agreement, an act that would be illegal in the private sector.
“When the government stepped in and bailed out Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), they signed a very specific agreement with the board of directors, which they entered into voluntarily,” Toomey said in Senate questioning of Lew. “This agreement involves the government providing guarantees and a line of credit and a very specific return. The government would receive a 10% return on the money it extended and options to purchase 79% of Fannie Mae and Freddie Mac.”
The agreement between the board of directors and shareholders was clear, until the government changed the terms without any agreement of the board of directors or representatives of shareholders. “In August of 2012, just as it was becoming apparent that Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) were going to return to significant profitability, the government came along and negotiated a new deal with itself,” Toomey said, highlighting the unusual situation. “With the treasury secretary on one side and a government appointed regulator on the other side, they wrote a new agreement whereby the government now gets 100% of the profits, when the previous agreement stipulated the government would have ownership of just under 80%.”
Breach of contract?
Then Toomey asked the money question. “Isn’t this a serious breach of the sanctity of contracts and doesn’t this undermine our commitment to the rule of law to have done this?”
Lew avoided the question, but ultimately Toomey wouldn’t let it go.
“We have had a very clear policy on Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), which is we are winding them down. This is important because we are making progress on a bipartisan basis to work on housing finance reform,” said Lew, not addressing the key issue of the government violating a written agreement.
“When the American people… can’t have confidence in a contract they have with the US government, I think that has a chilling effect on our economy”
“When you look at the agreements that were made for the federal government to step in and become a conservator and subsequent agreements that were made, it serves the public interest,” he said, addressing the written agreement but not answering the core question about the validity of the agreement. “The sooner we get on with the debate about housing finance reform the better.”
Then Lew moved to change the issue. “We sent clear signals of what our policy path was, so no one was not informed of what the goal was. The damage done to our economy because of the failures of Fannie and Freddie were deep and I think the policies in place were right.”
After Lew attempted to change the topic to Ukraine, Toomey asked a follow up question that again wasn’t answered. “Whatever signals you sent about policy cannot be more important than a contract that has been signed,” Toomey questions, hitting on the core issue once again. “When the American people… can’t have confidence in a contract they have with the US government, I think that has a chilling effect on our economy and our ability to attract private capital to housing reform.”
After this Toomey’s time had expired and Lew avoided answering the key question.
(Here is a link to the video. The interaction starts at 1 hour and 12 minutes into the testimony.)
Absolutely. It's a battle of public education. Unfortunately most people hear "bailout" and "taxpayer on the hook" and that's where the critical analysis ends. The media only spoon feeds canned answers and repetitious headlines, but is starting to slowly turn the corner by asking more in depth questions. I am with you hbmetalman, I hope the court decisions elicit some public outcry and probing media attention.
Nice post Bruce. Taxpayers are rightfully upset that Fannie and Freddie needed to be bailed out with government money...it created a huge economic ripple that is only now starting to resolve. However, what the taxpayers don't realize is that the alternative to not bailing them out would have been far, far worse. The mortgage market would have evaporated, property values and thus homeowner equity would have tumbled into freefall. Never mind the far reaching global economic depression that would have resulted. Taxpayers have recouped their monetary investment plus extras. They have gained far more in preserving a functioning mortgage marketplace that directly correlates with the cornerstone of American wealth--the ability to own a home. IMO...
Absolutely not. I don't know what in my post made you think that?
I am saying that even if the bill were to gain traction in the Senate (unlikely in itself), it's not going to pass in the House, let alone make it to Obama's desk.
Perhaps there is a chance of passing the Senate by April, but I have great doubt. There is almost zero chance it passes the House in that accelerated timeframe.
The specifics of the bill are not even known at this time. When those details are released, that's when the systematic teardown of that bill begins.
Let's hope the courts are more orderly, timely, and unbiased than Congress.
News: Bove speaks out in support of Fannie and Freddie
http://www.valuewalk.com/2014/03/fannie-mae-freddie-mac-senate-plan/
Somebody repost article please, on my mobile.
1,400,000 shares of FMCC traded at the exact same time as the same lot size of FNMA.
News: Big investors stay with Fannie, Freddie despite lawmakers' plans
By Svea Herbst-Bayliss | March 12, 2014 5:35 PM ET
Props to CatWizard. He beat me to it...
http://money.msn.com/business-news/article.aspx?feed=OBR&date=20140312&id=17429202
BOSTON (Reuters) - A Senate proposal for winding down Fannie Mae and Freddie Mac slammed their shares over the last two days, but big investors in the government-owned mortgage agencies aren't running away yet.
Fannie and Freddie shares fell 12 percent and 17 percent, respectively, on Wednesday, one day after Senate Banking Committee leaders agreed on a framework for a bill to draw down the lenders.
The sharp decline has hit big-name hedge funds which jumped into the once-failing companies as the housing market rebounded, including William Ackman's $12 billion Pershing Square Capital, Fannie Mae's biggest shareholder.
Despite this week's losses, several investors said they plan to stay the course, acknowledging that they were aware they had invested in such volatile stocks.
Senate Banking Committee Chairman Tim Johnson, a Democrat, and Senator Mike Crapo, the panel's top Republican, outlined a framework for legislation on Tuesday after months of talks that included input from the Obama administration. They said they intended to introduce a bill soon.
But several hedge fund managers, which often lock up their wealthy investors' money for years and therefore have the ability to stick with investments for a long time, said they would be patient and wait.
"There are a lot of details to be worked out, and there was no secret that Congress was planning to do this," said one investor who owns hundreds of thousands of shares and asked not to be identified by name.
Fannie Mae shares fell 49 cents on Wednesday to $3.54 a share on 124 million shares traded on OTCMarket. Freddie Mac ended down 68 cents at $3.36 a share on volume of 61 million shares.
Fannie and Freddie, which own or guarantee 60 percent of all U.S. home loans, provide a steady source of mortgage funds by buying loans from lenders and packaging them into securities that they sell to investors with a guarantee.
Their central role in the mortgage market led the government to bail them out to the tune of $187.5 billion during the 2007-2009 financial crisis. Lawmakers want to make sure taxpayers are never on the hook again.
Bruce Berkowitz of Fairholme Capital Management objected to the plan to wind Fannie and Freddie down. His fund ranks as one of the three shareholders in each company.
"What happened before 2008 was the result of regulatory and management failures, accelerated by political meddling. These failures continue today," Berkowitz said.
"Privately owned Fannie Mae and Freddie Mac are irreplaceable. All the sincere effort expended by the Senate Banking Committee simply confirms that there is no better alternative," he said in a statement.
Other large investors include Capital Research Global Investors and Seamans Capital Management.
Pershing Square has been largely mum on its Fannie and Freddie investment, with William Ackman declining to answer questions about it at an investment conference where he discussed every other bet.
Investors like Ackman, who shorted Fannie and Freddie six years ago, are essentially making a political bet. In addition to anticipating that politicians' plans might be changed significantly, there is something else that keeps them optimistic: lawsuits filed by both Fairholme and hedge fund Perry Capital.
The investors argue that it is illegal for the government to take all the companies' profits. Some investors expect the lawsuits to prevail and for billions of dollars to eventually come back to the companies.
Indeed, Republican Senator Pat Toomey of Pennsylvania, in a letter Friday to U.S. Treasury Secretary Jack Lew, signaled support for getting some cash to Fannie and Freddie shareholders. Toomey said he wants legislation to be "mindful of investors in addition to other considerations."
Shares of Fannie and Freddie are both down more than 30 percent on the week, not long after both hit their highest levels since 2008.
February's rally in the shares helped Pershing Square gain 7.4 percent, putting it up nearly 12 percent on the year, handily beating the average hedge fund's 1.4 percent gain, investors in his fund said. Pershing owns 115 million shares of Fannie and 64 million of Freddie.
This month's losses on Fannie and Freddie are going to hurt Ackman's fund.
"His marks are going to stink for the month," said David Tawil, whose Maglan Capital invests in distressed securities. He said his fund might buy stakes in Fannie and Freddie after lawmakers' language on the proposal is clarified.
Even though the proposal seems to harm equity holders, investors in Freddie and Fannie debt could come out winners.
The difference in yield on Fannie Mae and Freddie Mac bonds over Treasuries shrank broadly on Wednesday, on the view that the Senate plan would assure the government's guarantee of their existing debt. The yield gap between five-year Fannie Mae notes due February 2019 over five-year Treasuries narrowed 0.005 percentage point to about 0.15 percentage point.
(Reporting by Svea-Herbst Bayliss, Rodrigo Campos and Margaret Chadbourn; Additional reporting by Richard Leong; Editing by David Gaffen and Jonathan Oatis)
It was a big sell off yesterday, retail likely has a lot of cash tied up for a few days. Negative news still being pushed out. It will likely take some time to recover a bit. Not much resistance on the chart to 4 though, so it shouldn't be an enormous struggle to get above it.
keep us updated. Thanks!
News: Ralph Nader interview on CNBC
March 12, 2014
http://video.cnbc.com/gallery/?video=3000255975&__source=yahoo%7cheadline%7cquote%7cvideo%7c&par=yahoo
Nader says "the bill isn't going anywhere until at least 2016"
News: Warner interview on CNBC
March 12, 2014
http://video.cnbc.com/gallery/?video=3000255993&__source=yahoo%7cheadline%7cquote%7cvideo%7c&par=yahoo
Warner makes mention of validity of litigation against net worth sweep and mentions Berkowitz' proposal as a viable alternative moving forward to bring private capital into the marketplace.
Nader is merely an advocate for shareholders, with a political voice louder than most.
Bipartisan support of housing reform efforts should not be used as a gauge of passability. After all, Warner should know best, after co-authoring the Corker-Warner bill which was claimed to have broad bipartisan support and is now all but DOA.
Oh, it will pass just the like bipartisan Corker-Warner bill?
Obit, a question for you.
These types of HFT algorithmic trading "attacks" (for lack of a better word) are carried out only on the OTC, or can they happen in larger exchanges (nyse, nasdaq) as well? Just curious. Your analysis is fascinating and convincing. Thanks again!
My guess is somebody or a group of somebodys decided to dump a large position at once. Coupled with the negative news and triggering of stop-losses, panic selling set in en masse.
The timeframe was odd though, I agree.
L2 is all over the place. Freddie above Fannie, nearly 0.2 at one point. If you're looking to reverse holdings, now would be a good time to do it.
Thanks Obit. I do not disagree with you.
It's unfortunate that mainstream media are largely parrots...rife with repetition of headlines lacking critical analysis. Also unfortunate is the vast majority of Americans who are ignorant of government actions or do not/cannot comprehend them. Again, this is perpetuated by the media who feed them boilerplate thoughts/responses.
I'm just glad that big money is now involved with these stocks. They are the only groups capable of pushing for change. But how do you get your message across to a government, administration, and company that refuses to listen, let alone compromise? It will be interesting to watch how events play out in the near-term.
As always, your dialogue is appreciated.
If they are released from conservatorship prior to reform, what grounds does Congress have to reform them post conservatorship? It seems that the only thing they could do would be to revoke their federal charters. By releasing them, the government gives up a lot of power.
I think the gov would be much happier if an injunctive decision was reached negating the "net worth sweep", as that would give them fodder for pleasing shareholders while still maintaining ultimate control. They still get 10% dividend, still hold 79.9% of common stock, and still can strong-arm the GSEs into reform (if it's tenable and actionable in Congress).
IMO...
I think they are simply saying that conservatorship is untenable. Therefore, something needs to be done to end it. Their (Johnson-Crapo) proposed legislation is a means by which to do that.
Unfortunately, I do not think they are implying a release prior to reform. IMO...
Obit, an eloquent reply as always. Thank you for your contributions.
"An independent commission should be formed with members who are vetted for their success and experience in housing finance and who will not fall prey to personal interests and gain. They should produce a complete and authoritative report that can be distributed publicly to the Congress, White House, business sectors and general public for review. With all being on the same page, knowing the facts as they are and not as they wish or twist them to be, and the mass confusion removed, perhaps a better beginning and end could be had in housing finance reform. "
Presumably this initial assembly of this independent commission would mandated by the government? If so, do you think they would actually undertake this effort, for fear of exposing their utter lack of understanding of an extremely complex, high-stakes issue?
It seems as though several roundtable discussion have been held (in the spirit of your excellent suggestion) which try to attack these issues but ultimately the policymakers in Washington either disregard their conclusions or offer "straw-man" replies. How does a commission "convince" the government that their current line of thinking is broken?
Thanks in advance for your thoughtful reply!
My feelings on today's action. If Johnson-Crapo is currently viewed as the best effort to "wind-down" Fannie and Freddie, and its new release did not considerably drop the PPS, then what kind of news CAN tank this thing (short of actual enactment of reform/legislation that is obviously negative for shareholders)?
Perhaps. But from a cursory glance, the bill doesn't seem overwhelmingly positive for current shareholders (i.e. "wind down"). However, I can't find a copy of the proposal to outline the specific details.
Judging from this article, I don't see how this is any significant advancement over Corker-Warner. Basically, the government is explicitly telling dubious TBTF institutions that they will only be liable for 10% of their failures...the government will carry the rest of the burden. Also, using the words "eliminate affordable housing goals" is sure to incite the ire of the Democratic left.
"Under their proposal, Fannie Mae and Freddie Mac would be wound down and replaced with a new government reinsurer. It would mandate private financiers hold a stake and take at least 10 percent of the first losses on mortgage debt. The government would only provide assistance after private creditors had taken a hit.
...
The outline from the two senators said they plan to "eliminate affordable housing goals" and instead establish housing-related funds to ensure housing is available for all types of borrowers and renters."
http://www.reuters.com/article/2014/03/11/usa-housing-idUSW1N0LH02120140311
News: Fannie-Freddie Overhaul Bill Clears Hurdle
Heads of Senate Banking Panel Sketch Outline of Mortgage-Market Overhaul
By Nick Timiraos | 11 Mar, 2014
Our first glimpses of Johnson-Crapo Bill.
http://stream.wsj.com/story/latest-headlines/SS-2-63399/SS-2-477957/
The top Democrat and Republican on the Senate Banking Committee have reached agreement on the broad outlines of a bill to overhaul Fannie Mae and Freddie Mac and the nation’s $9.9 trillion mortgage market.
The bill will call for replacing Fannie and Freddie with a new system of federally insured mortgage securities in which private insurers would be required to take initial losses before any government guarantee would be triggered.
Fannie and Freddie, which were taken over by the U.S. in September 2008, remain one of the largest unaddressed pieces of the government’s financial-crisis rescues.
The agreement between Sens. Tim Johnson (D., S.D.) and Mike Crapo (R., Idaho) follows closely on the work of a proposal released last year by Sens. Bob Corker (R., Tenn.) and Mark Warner (D., Va.).
“There is near unanimous agreement that our current housing-finance system is not sustainable in the long term,” Mr. Johnson said in a statement. The current arrangement, in which Fannie and Freddie are backing nearly three in five new loans while under government control, is “unacceptable,” Mr. Crapo said. Their proposal “provides a balance between providing broad access to mortgages while protecting taxpayers from losses.”
A key question facing committee leaders: Can they attract enough Democratic support, particularly from more liberal members that have insisted on stronger provisions for affordable-housing subsidies, without driving off Republicans that have already reluctantly agreed to a broad government backstop of home loans? Ten members of the banking committee—five Republicans and five Democrats—had supported the Corker-Warner proposal.
Messrs. Johnson and Crapo, who had initially said they hoped to reach agreement by the end of last year, said they plan to release a full draft of their bill within days and to hold a committee vote within weeks. The product follows months of behind-the-scenes negotiations that involved close collaboration between Republican and Democratic committee staffers.
Their proposal faces an uphill battle. An array of industry and consumer interest groups have already signaled they will resist major changes to the nation’s unique system of financing home loans. Lawmakers on both sides of the aisle—though they disagree sharply over the future U.S. role in housing—could also join together to stall a bill.
Still, the prospect of bipartisan legislation would be significant not only because Washington has been gridlocked on other issues such as immigration and the budget, but also because lawmakers have done little to address the fate of the two mortgage-finance giants since their 2008 takeover.
“It would be a huge step forward for them to come forward with a bill,” said Phillip Swagel, who was an assistant secretary for economic policy under Henry Paulson, who was Treasury Secretary when Fannie and Freddie were rescued. He added: “The details are really hard and really important. That’s the tough part.”
The Obama administration has been closely involved in the product, which reflects key principles set forward by President Barack Obamalast August. Last month, current and former White House officials expressed alarm that more progress hadn’t been made.
Their concern is that, as Fannie and Freddie return to profitability and memories of their role in the housing bust have faded, it will become harder to pass measures strong enough to address the problems that triggered their 2008 rescues.
Meanwhile, hedge funds and other institutional investors that have bought up Fannie’s and Freddie’s stock at discounts will fight to ensure that the government doesn’t dispose of the companies in a way that destroy the value of their shares. They could see a huge payday if Fannie and Freddie are restructured as private entities.
While there is widespread agreement that the status quo isn’t tenable, bipartisan agreement has been slow to build. Conservatives have called for a mostly private market, but centrist Republicans and nearly all Democrats have argued that a federal role is needed to preserve broad access to the 30-year fixed-rate mortgage, which isn’t widely available in other countries.
The Senate framework would allow private entities to purchase an explicit government guarantee to cover catastrophic losses on mortgages issued as bonds from a new guarantor, similar to how the Federal Deposit Insurance Corp. regulates banks and provides deposit insurance to minimize bank runs.
Fannie and Freddie don’t make loans but instead buy them from lenders and package them as bonds. Their middleman role makes more widely available the 30-year fixed-rate mortgage by matching banks and other lenders with investors, such as pension funds that are willing to manage the interest-rate risk associated with long-term, fixed-rate mortgages.
Rather than issuing separate securities with a fuzzy implied federal guarantee as Fannie and Freddie did, the new system would see multiple firms issue a common security in which the government would stand behind the payment of principal and interest to security holders. Those firms would have to fail before the government guarantee would kick in.
When the government took over Fannie and Freddie in 2008, it agreed to inject huge amounts of cash to keep them solvent. In exchange, the government has taken nearly $188 billion in shares of “senior preferred” stock.
By the end of March, both companies will have returned nearly $203 billion to the U.S. in the form of dividend payments. Beginning last year, all of their profits are required to go to the Treasury as dividends, making it impossible for them to rebuild capital. The Treasury Department faces multiple lawsuits challenging those terms.
Many investors have bet that the firms will become so profitable that Congress and the administration will have little choice but to let some value flow back to shareholders. Shares of both companies have traded in recent days at their highest levels since the firms were taken over by the government in 2008.
Write to Nick Timiraos at nick.timiraos@wsj.com
Wesdawg, I've considered this several times as well. The current gap between Fannie and Freddie is among the largest observed (0.30!) in recent memory.
The only issue with flipping shares around is that Fannie seems to move well on technicals and Freddie seems to dog Fannie. Therefore, IMO, it's been a little more difficult to gauge Freddie's movements and therefore, harder to predict tops/bottoms. Fannie always seems to trade at a premium, so you'll have to pony up the difference if you want to buy back Fannie. However, I'm sure it is a good strategy if executed properly. These are my rambling thoughts and personal observations, so please do not consider them too strongly.
You should ask Usmcvet. I think he's done this recently.
News: ING bond sale may help rescue slow private mortgage bond market
Only $1.15 billion worth of legacy paper remains
By Brena Swanson | March 10, 2014
http://www.housingwire.com/articles/29257-ing-bond-sale-may-help-rescue-slow-private-mortgage-bond-market
The non-agency residential mortgage-backed securities market is estimated to revive in the second half of 2014, but the first signs of strengthening are starting to show.
“After weathering a bit of a supply drought, the US Non Agency RMBS marketplace is gearing up to bid on approximately $1.15 billion worth of legacy paper on Thursday March 13,” a note from Interactive Data said.
The list is comprised of 46 individual securities and is the first meaningful block of bonds to hit Wall Street since the third and final ING/DSTA liquidation was sold on Feb. 4, the report said.
The previous ING deal consisted of $2.1 billion in private mortgage bonds.
While the seller of Thursday’s BWIC is so far unreported, it is possible that Fannie Mae or Freddie Mac is behind it since they are working toward the Federal Housing Finance Agency’s goal of a 5% annual reduction in illiquid portfolio assets. Interactive Data added that the majority of the line items out for bid are the entire outstanding tranche size, implying a potential GSE carve-out.
The list is comprised mostly of non-investment grade securities backed by Subprime (55%) and Adjustable-Rate (43%) collateral, the loans are seasoned and generally performing well on the whole.
“All are Senior tranches and a few have insurance wrappers from a monoline. On a weighted average basis (by current face), the evaluated price of the aggregate list is approximately $93,” the note stated. “The fixed-rate component has a simple average evaluated price of $94.5, while the ARM and Subprime groupings are at $95.3 and $92.1 respectively.”
This comes on the heels of a report from Amherst Securities Group on Monday saying that the non-agency market has significantly dwindled and fell to $782.4 billion in unpaid balance, and 3.5 million in loans outstanding.
Once the second half of the year rolls around, Redwood Trust (RWT) will like start issuing again as the market starts to pick up, sources said.
News: Fannie Mae, Freddie Mac: Put-Back Requests Should Be Shown
by VW Staff, Richard X Bove | March 10, 2014
http://www.valuewalk.com/2014/03/fannie-mae-freddie-mac-put-back-requests/
Richard X. Bove agrees with Bruce Berkowitz on this point in the unfolding drama
Rafferty Capital Markets’ Richard X. Bove weighs in on the ongoing Fannie Mae / Freddie Mac saga, commenting on an issue that Bruce Berkowitz raised.
Bruce Berkowitz raised an intriguing issue in one of our conversations concerning Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC). Mr. Berkowitz indicated that the receivable inherent in the GSEs mortgage put-back requests should be shown on the balance sheets of both companies. I agree.
By failing to show what the companies might gain if their demands for mortgage put backs are met, Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) are understating both their earnings and current book values. Roger Puerto of Fairholme put together the tables on this and the following pages in answer to the question as to what that receivable might be. First, this is what has been paid:
Second, this is what is expected to be paid if the banks that have been assessed actually pay 10% to 12% of the notional assessment:
Fannie Mae and Freddie Mac’s payments demands
Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) have demanded payments from 13 additional banks. The notional amount requested is $134.3 billion. If one assumes that the GSEs will recapture 12% of the amounts noted, the receivable in question is $16.1 billion. However, the GSEs are expected to seek much more money from a broader list of banks.
Accounting rules suggest that the potential recoveries may be indicated since Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) have already recovered $8.3 billion from these requests.
The Missing Receivable
Government Projects Profit From Fannie Mae, Freddie Mac To Top $179B
by Mark Melin | March 10, 2014
http://www.valuewalk.com/2014/03/fannie-mae-freddie-mac-profit-to-top-179b/
Government is counting its trading profits before they are booked as they cling to their cash cow
The US government is becoming increasingly bullish on their ownership of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), the now highly profitable mortgage finance companies.
The White House budget office said Monday that it anticipates the government could take in nearly $179 million in profits over the next ten years if the terms of their conservatorship remain intact, tripling the government estimated profit from just one year ago.
In the wake of the 2008 mortgage-backed securities failure that preceded the stock market sell-off, the US government provided Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) $187.5 billion in bailout funds to keep the firms in business. After current payments are made at the end of this month, Fannie and Freddie will have repaid $202.9 billion to the government.
Amended agreement subject of lawsuits
In 2012 the government amended the bailout agreement, saying that all profits would flow to the US Treasury, with nothing going to shareholders as opposed to a 10% dividend on the bailout funds only. Buoyed by a strong housing market, the mortgage finance giants were much more profitable than anticipated, leading remaining shareholders to hope that the dividend stream would return.
Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) were thought of as highly conservative investments and held in the portfolios of many mom and pop retail investors as well as pension and retirement funds. When the crisis hit and the government took control, many confused retail investors sold their shares to hedge funds such as Perry Capital and Fairholme Capital Management, who are now aggressively lobbying the government to return the company into shareholder hands.
Activist Ralph Nader’s voice is heard
As previously noted in ValueWalk, Ralph Nader, a shareholder, is taking an activist stance as well. At a recent roundtable on the topic:
“In all the discussions following the 2008 Wall Street collapsed that involved Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), there was very little attention paid to the owners, the shareholders,” Nader said in prepared remarks. “These shareholders were assured in 2008 by the regulator (Lockhart) and then Chairman Bernanke and Secretary Paulson that both Fannie and Freddie were adequately capitalized and there was ‘nothing to worry about.’ Then a few weeks later they collapsed… What was interesting about those assurances (from Lockhart, Bernanke and Paulson) is that they were conducted by government officials. If corporate officials ever made those kinds of deceptive comments, even the Securities and Exchange Commission would have woken up and we would have seen some enforcement clarity. But it didn’t happen.”
Shareholders maintain that the decision by the Treasury to claim Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) profits as dividend payments is “plainly unlawful,” according to Theodore Olson, a lawyer at Gibson, Dunn & Crutcher LLP representing a shareholder, hedge fund Perry Capital. Olson, a former U.S. solicitor general who represents them, who spoke at the event, said “This deal has proven extraordinarily lucrative for the federal government.”
Shareholders “zombies?”
When characterizing the jilted shareholders, Nader described the group by saying “We are not talking about day traders. We are talking about investors who had been told Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) were the safest investments next to treasuries.” The government is now treating shareholders “as if they were zombies,” he said.