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Agree. I thought this was ruled on more or less.
This is true. Also some people become the biggest cheerleader of their shares when they find the need to get rid of them.
Been long since before 2010. Nothing to cover.
Yes shares are available there to short fnma and many other OTC stocks.
Treasury stock (treasury shares) are the portion of shares that a company keeps in its own treasury. Treasury stock may have come from a repurchase or buyback from shareholders, or it may have never been issued to the public in the first place.
So common worth 8 to 13 when all is done? IYO under the same deal what would 1 preferred fnmas bring after conversion. Would you get 25 dollars in common for each preferred and the those shares would be worth 8 to 13? At the max would your 6 dollar bring 50.00 +/-? Trying figure out what holders of fnmas would receive.
Was wondering the same thing.
Can someone explain why they think they are legal besides no one is contesting them. Not disagreeing but I see why some believe they are illegal given Judge Wheelers ruling. The only reason shareholders were not awarded anything is he ruled they would have lost everything anyway. The takings case of the nws keeps that ruling from taking place you would think. Thanks in advance.
I saw a 65k buy at 6.33 with bid/ask at 6.11/6.14 on fnmas. Didn't see the sell.
Posted this the other day. Covers AIG and how it pertains to fnma.
Revisiting Fannie Mae and Freddie Mac Takings Lawsuits in the Wake of Yesterday's AIG Decision
The decision issued yesterday by Judge Thomas Wheeler of the Court of Federal Claims concerning the lawsuit by Starr International, a large shareholder of AIG, will have significant implications for the similar claims brought by various shareholders of Fannie Mae and Freddie Mac (hereinafter, the "GSEs"). I've previously put up a postcritical of the trial judge's Fifth Amendment reasoning in certain of those lawsuits.There are definitely some similarities between the two and they should be worrisome to the government and heartening to the GSE shareholders. For example, Judge Wheeler refers to the Federal Reserve taking a 79.9% stake in AIG equity (in the form of convertible preferred) as "draconian", writes that the government "usurped control of AIG without ever allowing a vote of AIG's shareholders" and notes that, even after the loan was repaid, the government retained its stake. Of course those facts are all identical to the government takeover of the GSEs.But I see some significant differences as well. Judge Wheeler makes a very significant ruling under the Fifth Amendment, using a theory that, frankly, I was heretofore unaware of, that of "illegal exaction". In short, he concludes that, while the Fed was authorized by law to provide credit to AIG, it did not have the authority to exact, as a price for such credit, a 79.9% equity stake in AIG. "An illegal exaction occurs when the Government requires a citizen to surrender property the Government is not authorized to demand as consideration for action the Government is authorized to take." It is fascinating that there is language directly on point from an 1884 Supreme Court opinion, Swift & Courtney & Beecher Co. v. United States, 111 U.S. 22, 28-29 (1884) (“The parties were not on equal terms. . . . The only alternative was to submit to an illegal exaction or discontinue its business.”). Judge Wheeler also rejects the argument that the emergency context augmented the government's legal power or diminished the citizens' Fifth Amendment rights:"The Government’s inability to require forfeiture of rights and property in exchange for discretionary benefits is unchanged during times of crisis, when the rule of law is maintained by requiring that government acts be authorized by statute and the Constitution. Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398, 425-26 (1934) (“Emergency does not create power. Emergency does not increase granted power or remove or diminish the restrictions imposed upon power granted or reserved. . . . ‘Although an emergency may not call into life a power which has never lived, nevertheless emergency may afford a reason for the exertion of a living power already enjoyed.’”) (quoting Wilson v. New, 243 U.S. 332, 348 (1917)); Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 653 (1952) (Jackson, J., concurring) (“In view of the ease, expedition and safety with which Congress can grant and has granted large emergency powers, certainly ample to embrace this crisis, I am quite unimpressed with the argument that we should affirm possession of them without statute. Such power either has no beginning or it has no end.”)"Of course, that makes sense - the government can always take property to address an emergency or otherwise; it just has to pay just compensation when it does so.Somewhat counter-intuitively, Judge Wheeler proceeds to quash Starr's takings claim, because, he says, a "taking" only occurs if the government's action is authorized; here, he says, since the exaction was "illegal", it was unauthorized. This is purely a matter of semantics: either label says the government took property from private persons in violation of the Fifth Amendment. But, as I show in my discussion below of the GSE takeover, the statutory foundation for the government to take a controlling equity stake in them is better than the Fed had in the AIG context. Still, as I argued last year, a statutory foundation cannot, given the Supremacy Clause, relieve the government of its Fifth Amendment constraints. It still has to pay just compensation for taking, even if the taking is authorized and a true emergency exists. However, the specter of imminent bankruptcy causes the judge to determine that AIG shareholders sustained no economic loss from the illegal government action and therefore are due no further amount of "just compensation". He writes:"Common sense suggests that the Government should return to AIG’s shareholders the $22.7 billion in revenue it received from selling the AIG common stock it illegally exacted from the shareholders for virtually nothing. However, case law construing “just compensation” under the Fifth Amendment holds that the Court must look to the property owner’s loss, not to the Government’s gain. Brown v. Legal Found. of Wash., 538 U.S. 216, 235-36 (2003) (The “‘just compensation’ required by the Fifth Amendment is measured by the property owner’s loss rather than the [G]overnment’s gain.”); Kimball Laundry Co. v. United States, 338 U.S. 1, 5 (1949) (“Because gain to the taker . . . may be wholly unrelated to the deprivation imposed upon the owner, it must also be rejected as a measure of public obligation to requite for that deprivation.”); United States v. Miller, 317 U.S. 369, 375 (1943) (“Since the owner is to receive no more than indemnity for his loss, his award cannot be enhanced by any gain to the taker.”); Boston Chamber of Commerce v. Boston, 217 U.S. 189, 195 (1910) (Holmes, J.) (“And the question is, What has the owner lost? not, What has the taker gained?”)" And then he finds that the shareholders, had the government not intervened, would have lost everything. So there is no further compensation required. In doing so, he draws close parallels to the Takings cases brought by various auto dealers whose franchises were terminated as part of the restructurings of GM and Chrysler, in which the Federal Circuit opined: " Absent an allegation that GM and Chrysler would have avoided bankruptcy but for the Government’s intervention and that the franchises would have had value in that scenario, or that such bankruptcies would have preserved some value for the plaintiffs’ franchises, the terminations actually had no net negative economic impact on the plaintiffs because their franchises would have lost all value regardless of the government action."It's an interesting question whether a judge should opine on a liability issue when damages under the plaintiff's theory are going to be zero. Recently, in her Marblegate opinion, Judge Failla, SDNY, did the same thing, opining that an insolvent company's proposed out-of-court restructuring violated the Trust Indenture Act of 1939, even when she found, as a fact, that the complaining bondholders would receive no value if the restructuring failed and the company entered bankruptcy. So Judge Wheeler is not alone. I still am not sure it is the best practice under Article III, but I gather that appellate courts want the trial court to cover everything to avoid piecemeal litigation, so it may be just a fact of life in our legal system. Comparison to the GSE Takings LawsuitsThere are a few distinctions between the AIG opinion and the litigation challenging the government's takeover of publicly-traded Fannie Mae and Freddie Mac. First, the government's financial support of the GSEs came from the Treasury Department, not the Federal Reserve system; so a different statute was involved. The statute (the Housing and Economic Recovery Act of 2008) established the Federal Housing Financing Agency (FHFA) as an "Independent agency" and authorized it to become conservator or receiver of the GSEs and in such role, to “immediately succeed to—(i) all rights, titles, powers, and privileges of the [GSE], and of any stockholder, officer, or director of such [GSE] with respect to the [GSE] and the assets of the [GSE].” Second, the equity stake Treasury took in the GSEs was a combination of preferred stock and warrants to buy 79.9% of the common stock; the stock itself was not convertible. as in AIG. This may or may not be a matter of form; one legal consequence was that the Treasury Department did not vote a formal 79.9% equity stake in the GSEs. Of course, with its sister bureaucrats at FHFA, rather than a private board of directors of private citizens, running the company, it didn't need to. As to whether or not the Treasury's equity stake was properly authorized, "HERA amended the GSEs’ charters to temporarily authorize Treasury to “purchase any obligations and other securities issued by the [GSEs].” 12 U.S.C. § 1455(l)(1)(A) (Freddie Mac); 12 U.S.C. § 1719(g)(1)(A) (Fannie Mae). This provision also provided that the “Secretary of the Treasury may, at any time, exercise any rights received in connection with such purchases.” 12 U.S.C. § 1719(g)(2)(A). Treasury’s authority to invest in the GSEs expired on December 31, 2009." So arguably, the "illegal exaction" theory is not available in the GSE context if you read the statutory language broadly and literally. That is not disabling because, as Judge Wheeler describes it, the "illegal exaction" analysis is just the label that is applied to a taking that is unauthorized; proving authorization does not necessarily equate to the absence of a taking. Further, an "illegal exaction" argument still might be made, if one concludes that the statutory authorization to succeed to the rights of "any shareholder, officer or director" does not authorize a right to engage in self-dealing and thus breach the fiduciary duty of loyalty, because none of them would be understood to have the "right" to do that. In that view, any value extracted via self-dealing would be unauthorized and thus an illegal exaction. Apparently, from another blog I looked at, although no one has yet succeeded in getting a federal court to review FHFA's actions as conservator, in Sweeney Estate Marital Trust v United States (D.D.C. 2014), District Judge Amy Jackson noted that under FIRREA, which she characterizes as HERA's predecessor statute, judicial review was provided consistently where the federal agency was alleged to have taken actions as conservator tainted by conflict of interest. So, that line of attack appears to be the crucial determinant of the GSE plaintiffs' ability to challenge the Third Amendment. Third, a lesser-known, but extremely salient fact about the shareholder lawsuits in the GSE context is that they do not challenge the September 2008 terms. Rather they challenge a much later self-dealing transaction, described by Judge Lamberth as follows:"On August 17, 2012, Treasury and the GSEs, through FHFA, agreed to the Third Amendment to the PSPA, which is the focus of this litigation. The Third Amendment replaced the previous dividend formula with a requirement that the GSEs pay, as a dividend, the amount by which their net worth for the quarter exceeds a capital buffer of $3 billion. The capital buffer gradually declines over time by $600 million per year, and is entirely eliminated in 2018. In simpler terms, the amendment requires Fannie Mae and Freddie Mac to pay a quarterly dividend to Treasury equal to the entire net worth of each Enterprise, minus a small reserve that shrinks to zero over time. These dividend payments do not reduce Treasury’s outstanding liquidation preferences." (Citations and internal quotations omitted).The key point to see here is that, by August 17, 2012, the GSEs were not "on the verge of bankruptcy"; indeed, they were already profitable as Judge Lamberth himself acknowledges elsewhere in the opinion. So, the damages analysis Judge Wheeler uses -- correctly, in my view -- that AIG's shares would have had no value in the absence of government action, is not going to help the government in the GSE context. Rather, everything will come down to whether or not the self-dealing cash sweep agreed to between FHFA and Treasury was a cognizable taking or not. If it is, the just compensation claim will be very large. I suppose I should disclose that my firm was one of the firms advising AIG at this time and further that I spent Sunday the 14th of September in their headquarters with an M&A partner and three top-bracket private equity firms that were studying whether or not a structure could be found to invest rescue funds. Discussions never got off the ground because AIG's team of financial advisors determined its hole was too large for them to fund and AIG really spent no time at all with them. In fact, I spent the evening chatting on the phone with friends at Lehman and also with advisors to the Obama campaign, in both cases about the implications of the impending Lehman bankruptcy. A memorable day and night in my career.
https://www.abi.org/feed-item/revisiting-fannie-mae-and-freddie-mac-takings-lawsuits-in-the-wake-of-yesterdays-aig
Why would the SEC consider the warrants illegal for fnma when they had no problem with AIGs warrants.
How do you remove Treasury and still have a takings case?
Which case is this.
What do you think of this statement from Munchin?
According to Mnuchin, the two agencies are staying afloat because of support from the Treasury.
“And as you know, right now those two companies only exist because we have a giant line from the Treasury that support them.”
This is my biggest problem with this. 80b in profit so far plus warrants. If fixing the GSEs and protecting tax payers is the number 1 priority why pile on? Why even have to raise capital unless the priority is to financially rape the companies and dilute shareholders.
Kind of what I was thinking. I know this has been an easy flip but we have to be getting close to being done or maxed out.
The last os count of 323m was on Nov. 3rd. Since then there has been over 325m shares sold. Anyone got an opinion on this?
It should be though.
As long as the governments number 1 priority is treasuries return on investment followed by F&F being capitalized you are correct.
This is what I am hoping for.
2017 Market Holidays Date
New Year's Day Sunday, January 1, 2017 (Observed Monday, January 2)
Martin Luther King Jr. Day Monday, January 16, 2017
President's Day Monday, February 20, 2017
Good Friday Friday, April 14, 2017
Memorial Day Monday, May 29, 2017
Independence Day Tuesday, July 4, 2017
Labor Day Monday, September 4, 2017
Thanksgiving Day Thursday, November 23, 2017
Christmas Monday, December 25, 2017
Revisiting Fannie Mae and Freddie Mac Takings Lawsuits in the Wake of Yesterday's AIG Decision
The decision issued yesterday by Judge Thomas Wheeler of the Court of Federal Claims concerning the lawsuit by Starr International, a large shareholder of AIG, will have significant implications for the similar claims brought by various shareholders of Fannie Mae and Freddie Mac (hereinafter, the "GSEs"). I've previously put up a postcritical of the trial judge's Fifth Amendment reasoning in certain of those lawsuits.There are definitely some similarities between the two and they should be worrisome to the government and heartening to the GSE shareholders. For example, Judge Wheeler refers to the Federal Reserve taking a 79.9% stake in AIG equity (in the form of convertible preferred) as "draconian", writes that the government "usurped control of AIG without ever allowing a vote of AIG's shareholders" and notes that, even after the loan was repaid, the government retained its stake. Of course those facts are all identical to the government takeover of the GSEs.But I see some significant differences as well. Judge Wheeler makes a very significant ruling under the Fifth Amendment, using a theory that, frankly, I was heretofore unaware of, that of "illegal exaction". In short, he concludes that, while the Fed was authorized by law to provide credit to AIG, it did not have the authority to exact, as a price for such credit, a 79.9% equity stake in AIG. "An illegal exaction occurs when the Government requires a citizen to surrender property the Government is not authorized to demand as consideration for action the Government is authorized to take." It is fascinating that there is language directly on point from an 1884 Supreme Court opinion, Swift & Courtney & Beecher Co. v. United States, 111 U.S. 22, 28-29 (1884) (“The parties were not on equal terms. . . . The only alternative was to submit to an illegal exaction or discontinue its business.”). Judge Wheeler also rejects the argument that the emergency context augmented the government's legal power or diminished the citizens' Fifth Amendment rights:"The Government’s inability to require forfeiture of rights and property in exchange for discretionary benefits is unchanged during times of crisis, when the rule of law is maintained by requiring that government acts be authorized by statute and the Constitution. Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398, 425-26 (1934) (“Emergency does not create power. Emergency does not increase granted power or remove or diminish the restrictions imposed upon power granted or reserved. . . . ‘Although an emergency may not call into life a power which has never lived, nevertheless emergency may afford a reason for the exertion of a living power already enjoyed.’”) (quoting Wilson v. New, 243 U.S. 332, 348 (1917)); Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 653 (1952) (Jackson, J., concurring) (“In view of the ease, expedition and safety with which Congress can grant and has granted large emergency powers, certainly ample to embrace this crisis, I am quite unimpressed with the argument that we should affirm possession of them without statute. Such power either has no beginning or it has no end.”)"Of course, that makes sense - the government can always take property to address an emergency or otherwise; it just has to pay just compensation when it does so.Somewhat counter-intuitively, Judge Wheeler proceeds to quash Starr's takings claim, because, he says, a "taking" only occurs if the government's action is authorized; here, he says, since the exaction was "illegal", it was unauthorized. This is purely a matter of semantics: either label says the government took property from private persons in violation of the Fifth Amendment. But, as I show in my discussion below of the GSE takeover, the statutory foundation for the government to take a controlling equity stake in them is better than the Fed had in the AIG context. Still, as I argued last year, a statutory foundation cannot, given the Supremacy Clause, relieve the government of its Fifth Amendment constraints. It still has to pay just compensation for taking, even if the taking is authorized and a true emergency exists. However, the specter of imminent bankruptcy causes the judge to determine that AIG shareholders sustained no economic loss from the illegal government action and therefore are due no further amount of "just compensation". He writes:"Common sense suggests that the Government should return to AIG’s shareholders the $22.7 billion in revenue it received from selling the AIG common stock it illegally exacted from the shareholders for virtually nothing. However, case law construing “just compensation” under the Fifth Amendment holds that the Court must look to the property owner’s loss, not to the Government’s gain. Brown v. Legal Found. of Wash., 538 U.S. 216, 235-36 (2003) (The “‘just compensation’ required by the Fifth Amendment is measured by the property owner’s loss rather than the [G]overnment’s gain.”); Kimball Laundry Co. v. United States, 338 U.S. 1, 5 (1949) (“Because gain to the taker . . . may be wholly unrelated to the deprivation imposed upon the owner, it must also be rejected as a measure of public obligation to requite for that deprivation.”); United States v. Miller, 317 U.S. 369, 375 (1943) (“Since the owner is to receive no more than indemnity for his loss, his award cannot be enhanced by any gain to the taker.”); Boston Chamber of Commerce v. Boston, 217 U.S. 189, 195 (1910) (Holmes, J.) (“And the question is, What has the owner lost? not, What has the taker gained?”)" And then he finds that the shareholders, had the government not intervened, would have lost everything. So there is no further compensation required. In doing so, he draws close parallels to the Takings cases brought by various auto dealers whose franchises were terminated as part of the restructurings of GM and Chrysler, in which the Federal Circuit opined: " Absent an allegation that GM and Chrysler would have avoided bankruptcy but for the Government’s intervention and that the franchises would have had value in that scenario, or that such bankruptcies would have preserved some value for the plaintiffs’ franchises, the terminations actually had no net negative economic impact on the plaintiffs because their franchises would have lost all value regardless of the government action."It's an interesting question whether a judge should opine on a liability issue when damages under the plaintiff's theory are going to be zero. Recently, in her Marblegate opinion, Judge Failla, SDNY, did the same thing, opining that an insolvent company's proposed out-of-court restructuring violated the Trust Indenture Act of 1939, even when she found, as a fact, that the complaining bondholders would receive no value if the restructuring failed and the company entered bankruptcy. So Judge Wheeler is not alone. I still am not sure it is the best practice under Article III, but I gather that appellate courts want the trial court to cover everything to avoid piecemeal litigation, so it may be just a fact of life in our legal system. Comparison to the GSE Takings LawsuitsThere are a few distinctions between the AIG opinion and the litigation challenging the government's takeover of publicly-traded Fannie Mae and Freddie Mac. First, the government's financial support of the GSEs came from the Treasury Department, not the Federal Reserve system; so a different statute was involved. The statute (the Housing and Economic Recovery Act of 2008) established the Federal Housing Financing Agency (FHFA) as an "Independent agency" and authorized it to become conservator or receiver of the GSEs and in such role, to “immediately succeed to—(i) all rights, titles, powers, and privileges of the [GSE], and of any stockholder, officer, or director of such [GSE] with respect to the [GSE] and the assets of the [GSE].” Second, the equity stake Treasury took in the GSEs was a combination of preferred stock and warrants to buy 79.9% of the common stock; the stock itself was not convertible. as in AIG. This may or may not be a matter of form; one legal consequence was that the Treasury Department did not vote a formal 79.9% equity stake in the GSEs. Of course, with its sister bureaucrats at FHFA, rather than a private board of directors of private citizens, running the company, it didn't need to. As to whether or not the Treasury's equity stake was properly authorized, "HERA amended the GSEs’ charters to temporarily authorize Treasury to “purchase any obligations and other securities issued by the [GSEs].” 12 U.S.C. § 1455(l)(1)(A) (Freddie Mac); 12 U.S.C. § 1719(g)(1)(A) (Fannie Mae). This provision also provided that the “Secretary of the Treasury may, at any time, exercise any rights received in connection with such purchases.” 12 U.S.C. § 1719(g)(2)(A). Treasury’s authority to invest in the GSEs expired on December 31, 2009." So arguably, the "illegal exaction" theory is not available in the GSE context if you read the statutory language broadly and literally. That is not disabling because, as Judge Wheeler describes it, the "illegal exaction" analysis is just the label that is applied to a taking that is unauthorized; proving authorization does not necessarily equate to the absence of a taking. Further, an "illegal exaction" argument still might be made, if one concludes that the statutory authorization to succeed to the rights of "any shareholder, officer or director" does not authorize a right to engage in self-dealing and thus breach the fiduciary duty of loyalty, because none of them would be understood to have the "right" to do that. In that view, any value extracted via self-dealing would be unauthorized and thus an illegal exaction. Apparently, from another blog I looked at, although no one has yet succeeded in getting a federal court to review FHFA's actions as conservator, in Sweeney Estate Marital Trust v United States (D.D.C. 2014), District Judge Amy Jackson noted that under FIRREA, which she characterizes as HERA's predecessor statute, judicial review was provided consistently where the federal agency was alleged to have taken actions as conservator tainted by conflict of interest. So, that line of attack appears to be the crucial determinant of the GSE plaintiffs' ability to challenge the Third Amendment. Third, a lesser-known, but extremely salient fact about the shareholder lawsuits in the GSE context is that they do not challenge the September 2008 terms. Rather they challenge a much later self-dealing transaction, described by Judge Lamberth as follows:"On August 17, 2012, Treasury and the GSEs, through FHFA, agreed to the Third Amendment to the PSPA, which is the focus of this litigation. The Third Amendment replaced the previous dividend formula with a requirement that the GSEs pay, as a dividend, the amount by which their net worth for the quarter exceeds a capital buffer of $3 billion. The capital buffer gradually declines over time by $600 million per year, and is entirely eliminated in 2018. In simpler terms, the amendment requires Fannie Mae and Freddie Mac to pay a quarterly dividend to Treasury equal to the entire net worth of each Enterprise, minus a small reserve that shrinks to zero over time. These dividend payments do not reduce Treasury’s outstanding liquidation preferences." (Citations and internal quotations omitted).The key point to see here is that, by August 17, 2012, the GSEs were not "on the verge of bankruptcy"; indeed, they were already profitable as Judge Lamberth himself acknowledges elsewhere in the opinion. So, the damages analysis Judge Wheeler uses -- correctly, in my view -- that AIG's shares would have had no value in the absence of government action, is not going to help the government in the GSE context. Rather, everything will come down to whether or not the self-dealing cash sweep agreed to between FHFA and Treasury was a cognizable taking or not. If it is, the just compensation claim will be very large. I suppose I should disclose that my firm was one of the firms advising AIG at this time and further that I spent Sunday the 14th of September in their headquarters with an M&A partner and three top-bracket private equity firms that were studying whether or not a structure could be found to invest rescue funds. Discussions never got off the ground because AIG's team of financial advisors determined its hole was too large for them to fund and AIG really spent no time at all with them. In fact, I spent the evening chatting on the phone with friends at Lehman and also with advisors to the Obama campaign, in both cases about the implications of the impending Lehman bankruptcy. A memorable day and night in my career.
https://www.abi.org/feed-item/revisiting-fannie-mae-and-freddie-mac-takings-lawsuits-in-the-wake-of-yesterdays-aig
Oh how opinions change when some people sell.
Never going to happen. How do you lock up boo for stealing the same money that Trump has continued to stealing?
What evidence do you have to back that statement up? You say it like it is a fact.
Total Shares Outstanding (millions) 2
Why would they be showing 2 million os?
http://www.nasdaq.com/symbol/dgwr/institutional-holdings
There is so many problems with these posts all credibility is gone.
If the buyer is using an agent wouldn't he also get a cut?
What do you mean by trade page?
I don't think so. It's usually split between the selling agent and the buying agent. If the selling agent isn't the broker then a third cut is in there. At least that's the way I have always understood it. Also no one is forcing the seller to use a broker so the can skip the commission altogether.
NAR Principles for Housing Finance Reform
NAR supports restructuring the secondary mortgage market to ensure a reliable and affordable source of
mortgage capital for consumers, in all types of markets, to avoid a major disruption to the nation's economy
that would result from the total collapse of the housing finance sector. Restructuring is required in response
to the failure of Fannie Mae and Freddie Mac, which has been under government control since entering
conservatorship in September 2008.
• An efficient and adequately regulated secondary market is essential to providing affordable
mortgages to consumers. The secondary market, where mortgages are securitized, is an important
and reliable source of capital for lenders and therefore for consumers. Without a secondary market,
mortgage interest rates would be unnecessarily higher and unaffordable for many Americans. In
addition, a poorly functioning secondary market will impede both recovery in housing sector and the
overall economy.
• The old GSE system with private profits and taxpayer loss must be replaced. The current
GSEs (Fannie Mae and Freddie Mac) should be replaced with government-chartered, nonshareholder
owned authority(s) that are subject to sufficient regulations on product, revenue
generation and usage, and retained portfolio practices in a way that ensures they can accomplish their
mission to support long-term mortgage financing and protect the taxpayer.
• Reforms should ensure a strong, efficient financing environment for homeownership and
rental housing. The mission of the new authority(s) must include increasing sustainable
homeownership, providing access to mortgage financing and refinancing for consumers who have
demonstrated the ability to sustain homeownership. Creditworthy consumers require a steady flow of
mortgage funding that, even during economic downturns, will continue to be available as insured by
an explicit government guarantee.
• The government must clearly, and explicitly, offer a guarantee of mortgage instruments
facilitated by the authority(s) that meet the Qualified Mortgage (QM) standards. This is
essential to ensure qualified, creditworthy borrowers have access to affordable mortgage credit.
Without government backing, consumers will pay much higher mortgage interest rates and
mortgages may at times not be readily available at all-as happened in jumbo and commercial real
estate loans. Taxpayer risk would be mitigated through the use of mortgage insurance on loan
products with a loan-to-value ratio higher than 80 percent, or through other fees paid to the
government.
• The new authority(s) should guarantee or insure a wide range of safe, reliable mortgage
products. These mortgage products include 15-year and 30-year fixed rate loans, traditional
adjustable-rate mortgages (ARMs), and other products that have stood the test of time and for which
American homeowners have demonstrated a strong “ability to repay.”
• Provide a self-sufficient mechanism whereby safe, sound, transparent, and insured Mortgage
Backed Securities (MBS) may be packaged and sold. There must be an option for an explicit
government guarantee or insurance for all offered MBS within the secondary mortgage market. The
creation of a not-for-profit “utility(s)” facility is needed to receive, package, sell and guarantee MBS.
The authority(s) should operate with similar insurance and enforcement components as the FDIC.
This option must minimize taxpayer exposure.
2
• Sound and sensible underwriting standards must be established. Establish standardized, sound
underwriting principles and products that provide the foundation for responsible, credit worthy
borrowers to be able to achieve homeownership goals. For additional safety, these standards must
also be applied to securities (MBSs), purchased for portfolio (to a limited extent).
• The authority(s) should price loan products or guarantees based on risk. In addition, the new
authority(s) must set standards for the MBS they guarantee that establish transparency and
verifiability for loans within the MBSs.
• Ensure solid, verifiable, current loan level data is available to investors that empowers and
enables them to conduct their own risk analysis. There is a strong consensus among multiple
market participants that solid loan level data is the essential foundation from which to rebuild the
private mortgage security industry. Investors want to be empowered and enabled to conduct their
own analysis. With properly structured loan level data the mortgage collateral supporting a regulated,
securitized instrument will lead to a verifiable, current predictable instrument of cash flow and thus
will attracting private capital.
• The reformed authority(s) must have a separate legal identity from the federal government
but serve a public purpose. Unlike a federal agency, the authority(s) will have considerable political
independence and be self-sustaining given the appropriate structure.
• The new authority(s) should remain politically independent. Political independence of the
authority(s) is mandatory for successful operation. CEOs should have fixed terms so they cannot be
fired without cause, and they should not be allowed to lobby. Additionally, the authority(s) should be
self-funded instead of receiving ongoing appropriations.
• There must be strong oversight of the authority(s). The new authority(s) should be overseen by
the Federal Housing Finance Agency (FHFA) or a successor agency that would make timely reports
to allow for continual evaluation of the authority(s)’ performance.
• Restore investor confidence and trust in the Representations and Warranties via the
standardization of pooling and servicing contracts. Standardization of Representations and
Warranties is imperative. Pooling and Servicing Agreements (PSAs) must be simple with clear terms
and definitions so they are easily understood by investors. They must have clear disclosures of any
deviations from “Federal Best Practice Standards,” clearly define “buy back” rules, and servicer
operational policies must be consistent with their fiduciary duties to the investor.
• The new system must allow for mortgages that are syndicated through explicitly government
guaranteed mortgage-backed securities (MBS) to be assumable. When interest rates rise,
especially in high cost areas, the availability of an assumable low rate mortgage on a property may
become the most affordable source of financing for a qualified assuming buyer
http://www.narfocus.com/billdatabase/clientfiles/172/4/1843.pdf
Realtors®: Fannie Mae, Freddie Mac Conservatorship Takes Center Stage As Next Housing Finance Regime Comes Into Focus
PRESS RELEASE PR Newswire
Nov. 2, 2017, 06:30 PM
WASHINGTON, Nov. 2, 2017 /PRNewswire/ -- Nearly a decade after the federal government took control of Fannie Mae and Freddie Mac through conservatorship, little progress has been made in finalizing housing finance policy that can take the secondary mortgage market beyond the status quo.
Kevin Brown's Testimony
Leaders on the House Financial Services Subcommittee on Housing and Insurance took steps to change that this week with a hearing titled "Sustainable Housing Finance: Private Sector Perspectives on Housing Finance Reform."
Industry leaders, including the National Association of Realtors®, testified at the event. Kevin Brown, chair of NAR's Conventional Financing Committee, told Members of Congress during his testimony that Realtors® have two key objectives in the housing finance reform discussion.
"First, Realtors® want to ensure that in all markets affordable mortgage capital will always remain available for creditworthy Americans," Brown said. "Second, Realtors® believe that taxpayer dollars should be protected."
Fannie Mae and Freddie Mac, both considered "government-sponsored enterprises," are responsible for providing liquidity to lending institutions through a secondary mortgage market, where loans are securitized and sold to investors. This activity affords banks and other lending institutions the liquidity to continue making loans, while incentivizing them to make mortgage products like the 30-year fixed-rate mortgage available to middle-class consumers.
NAR has argued that it is time to move Fannie Mae and Freddie Mac out of conservatorship, which Brown told members of Congress is unsustainable in its current form. Instead, Brown offered a clear vision for a "government-chartered, non-shareholder owned" system that puts its service to homeowners and taxpayers ahead of profits.
"NAR believes this structure, with clearly defined roles and enhanced safeguards, is the best model for the new authorities, because it establishes a separate legal identity from the federal government while serving a public purpose," Brown said. "Unlike a federal agency, government-chartered organizations are established to be politically independent and often are self-sustaining – not requiring appropriations from Congress. The ability of the authorities to focus on their mission, without the need to chase risky profit-driven opportunities, is an important criteria for Realtors®."
As part of the reformed system, Brown outlined some important criteria for success including:
An explicit government guarantee of the new authorities.
Putting profits towards capital reserves to alleviate losses that occur during market fluctuations and economic downturns.
Converting Fannie Mae and Freddie Mac into the new authorities to utilize existing infrastructure and capabilities and minimize market disruption.
The government-chartered authorities are preferable to nationalized or fully privatized systems, Brown said, because they could respond to market downturns effectively, while also minimizing taxpayer exposure to losses. Brown also suggested that the new authorities should utilize a regulated, retained portfolio, which could be tapped during a downturn or to test innovative mortgage products.
In the past, NAR contributed to the conversation on how a new housing finance system work in part through a series of principles on housing finance reform. As talk of housing finance reform heats again on Capitol Hill, Brown made it clear that achieving success is more important than ever.
"The stakes have never been higher for the housing market and the broader economy," he said. "Yet, there are sizeable challenges and risks associated with the ongoing conservatorships of the enterprises. Comprehensive housing finance reform enacted by Congress will help address many of these issues."
The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1.3 million members involved in all aspects of the residential and commercial real estate industries.
http://markets.businessinsider.com/news/stocks/Realtors-Fannie-Mae-Freddie-Mac-Conservatorship-Takes-Center-Stage-As-Next-Housing-Finance-Regime-Comes-Into-Focus-1001848834
Sounded like he supports replacing F&F with private banks over time to me. I don't see anything in that response that was positive.
What will Alex Jones and company think about this? He has spent his entire career warning everyone of the evils of TCG and all associated with it. A past partner of TCG in charge of the fed. If he truly believes what he says he may have a stroke over this. Then again he could have been telling the truth in court and it's all a scam.
The amount work and effort is mind boggling.
That is the concerning part. They have vilified and tried to erase everything Bo has done except this. Why
Fed Governor Powell: Here are 5 principles for housing finance reform
Banking reform versus housing finance reform
July 6, 2017 Brena Swanson 5 Comments
KEYWORDS FANNIE MAE AND FREDDIE MAC FEDERAL RESERVE FEDERAL RESERVE GOVERNOR JEROME POWELL GSE REFORM JEROME POWELL
Wall Street
While the Federal Reserve might not be charged with housing finance reform, it does not mean its immune from the effect of the ultimate reform options are that put in place, Federal Reserve Governor Jerome Powell said in a speech on Thursday at the American Enterprise Institute.
Powell explained that even though the Fed does not design or evaluate proposals for housing finance reform, it is “responsible for regulating and supervising banking institutions to ensure their safety and soundness, and more broadly for the stability of the financial system.”
Powell’s speech Thursday morning comes amid a growing call for reforming the government–sponsored enterprises. Associations including the Independent Community Bankers of America, National Association of Federally-Insured Credit Unions and Mortgage Bankers Association have all already submitted proposals on how they think GSE reform should be tackled.
In fact, the MBA came out in support of Powell's speech, “Governor Powell’s speech is very consistent with our principals. Obviously our paper has a lot of detail to it that goes further than the speech, but it is very consistent and helpful to the effort of getting progress made towards reform. Governor Powell makes a very good case as to why we need to move forward towards reform and not be complacent with this current status or the model of the past that led to conservatorship in the first place,” said Dave Stevens, MBA president and CEO.
But Powell’s stance on GSE reform is different given that he is coming at the problem from the angle of a Fed governor. But in his speech, his overall call was the same: there is an “urgent need for fundamental reform of our system of housing finance--the great unfinished business of post-financial crisis reform.”
Since it’s been more than eight years since Fannie Mae and Freddie Mac were placed into conservatorship, Powell warned that the next few years may present the last best chance to finish these critical reforms, as memories of the crisis fade.
To Powell, the key to housing finance reform is to apply the lessons of banking reform to housing reform.
“The post-crisis reform program for our largest banks presents an appropriate standard against which the housing finance giants should be judged. After eight years of reform, our largest banking institutions are now far stronger and safer,” he said.
For example, he stated that common equity capital held by the eight U.S. global systemically important banks has more than doubled to $825 billion from about $300 billion before the crisis. After the crisis revealed significant underlying liquidity vulnerabilities, these institutions now hold $2.3 trillion in high-quality liquid assets, or 25% of their total assets.
So for the GSEs, Powell said, “The most obvious and direct step forward would be to require ample amounts of private capital to support housing finance activities, as we do in the banking system. We should also strive for a system that can continue to function even in the event of a default of any firm. No single housing finance institution should be too big to fail.” As it stands, Fannie Mae and Freddie Mac must reach a 0% capital buffer by 2018.
Powell laid out some principles for reform based on the lessons he’s learned from the old system's collapse, and from the experience of post-crisis bank reform.
1. Future housing bailouts
"First, we ought to do whatever we can to make the possibility of future housing bailouts as remote as possible. Housing can be a volatile sector, and housing is often found at the heart of financial crises. Our housing finance institutions were not--and are not--structured with that in mind. Extreme fluctuations in credit availability for housing hurt vulnerable households, reduce affordability and availability, and, as we have seen, can threaten financial stability."
2. Government guarantee
"Some argue that government cannot avoid bearing the deep-in-the-tail risk of a catastrophic housing crisis. A number of proposals incorporate a government guarantee to cover this risk, to take effect after a significant stack of private capital is wiped out.
If Congress chooses to go in this direction, any such guarantee should be explicit and transparent, and should apply to securities, not to institutions. Reform should not leave us with any institutions that are so important as to be candidates for too-big-to-fail."
3. Increase competition
"We should promote greater competition in this market. The economics of securitization do not require a duopoly. Yet there is no way for private firms to acquire a GSE charter and enter the industry."
4. Use the existing housing finance system
"It is worth considering simple approaches that restructure and repurpose parts of the existing architecture of our housing finance system. We know that housing reform is difficult; completely redrawing the system may not be necessary and could complicate the search for a solution."
5. Find a bipartisan solution
"We need to identify and build upon areas of bipartisan agreement. In my view, at this late stage we should not be holding out for the perfect answer. We should be looking for the best feasible plan to escape the unacceptable status quo."
“It is ironic that the housing finance system should escape fundamental reform efforts. The housing bubble of the early 2000s was, after all, an essential proximate cause of the crisis,” he said. “While post-crisis regulation has addressed mortgage lending from a consumer protection standpoint, the important risks to taxpayers and the broader economy and financial system have not been robustly addressed.”
Powell concluded, “Housing finance reform will protect taxpayers from another bailout, be good for households and the economy, and go some distance toward mitigating the systemic risk that the GSEs still pose.”
Lew was asked during one of the hearings what protection was in place in case F&F had trouble during another downturn. He said there was 100b plus in an account just for this. Was he talking about the funds available to draw on or money in an account who knows?Was the credit line available less than 200b in 2014?
Don't know why you say that. One of the names at the bottom was interesting to me.