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Wow! "The typical homeowner gained $25,000 in homeowner equity in 2020!" per Chris Yun, NAR long time (usually a little overly optimistic) economist:
https://www.nar.realtor/videos/december-2020-existing-and-pending-home-sales
Sounds like a debate was held at Oxford University, and the title was probably, "What caused the Great Financial Crisis of 2008/9". There was a speaker before Eisman naming the reasons why it happened and he probably said that it was the twins fault and Eisman corrected him in the other side of the debate...just a guess...
I mean, here's the dilemma, do you pull the trigger on some dry powder now, and possibly catch a falling knife, especially if there is no ruling until June, or do you not and possibly not be able to acquire more of an interest in these Financial Juggernauts for a buck or two a share? Holding is an option as well, but it seems like SP will pop upward on a favorable Collins Plaintiffs ruling and this could be elevated and not come back down to these levels (FOMO?). WHAT DO YOU THINK?
Seems like FOREVER, doesn't it, thanks for the heads up with your earlier post, great find! I think we will get Justice, as even a government conservator can't take all of its wards profits, whether via a net worth Sweep or Liquidation Preference! Stay strong and long AND GLTA!
To provide RETROSPECT RELIEF on the insulated Unconstitutional federal agency head issue that Seila Law left open when it comes to the FHFA, a remedy denied by the 5th Circuit EnBanc court ruling by the thinnest of margins! Also, the case could be used as a means of overturning Humphreys Executor, a case that was the byproduct of your favorite past president, FDR! This would be a "yuge" welcome for the Federalist Society (aren't you a card carrying member, you should be, check'em out!). Lastly, the SCOTUS can use Collins as a means of expanding the Unitary Executive Principle, which naturally DJT is hoping for! But you knew that already, right!
I totally get it, the sour puss stance on the federal courts AFTER ALL THESE YEARS! But the issues in Collins were likely to be appealed as far as possible anyway, and the issues in Collins will no longer be appeallable.
So far, they have issued 15 opinions and heard at LEAST 15 oral arguments, prior to hearing Collins. REMEMBER,THEY CAN LISTEN TO MORE THAN 1 CASE ON AN ORAL ARGUMENT DAY!
On 12/08, they heard the Facebook and Stein case, no opinion released on the former, on the later case, opinion issued on January 25th!
On 12/07, they heard the Nazi art victims cases, and those two cases were released last time!
On 12/02, they heard a La. Criminal case, that needs an opinion.
On 12/01, they heard the Nestle case, that needs an opinion.
On 11/30, the Van Buren case was heard, that needs an opinion.
Remember too, they have to prepare to hear cases through at least April if not May, they don't have to decide cases chronologically, and Collins, theoretically could be a massive Administrative Law Case, especially in the event that they overrule Humphreys Executor! On the other hand, they have had Collins in their inbox since September 2019, did alot of the "heavy lifting" in Seila Law vs. CFPB, and given the importance to the future of housing in America and the current limbo in the Executive branch waiting for a decision on this case, could be sooner than June.
At least in the meantime, the gses are booking capital!
Well, its been around 77 days when they announce it, if they are....
FUN STARTS AGAIN NEXT THURSDAY AT 10AM!
GUESS WHOSE GOING TO ISSUE AT LEAST 1 OPINION NEXT THURSDAY...
https://www.supremecourt.gov/
In 2020, we provided $1.4 trillion in liquidity, enabling the financing of approximately 6 million home purchases, refinancings, and rental units. https://spr.ly/6010H9aUI
MC's "collars" kick in now I think under the Capital Rule, so I think it's like 4+% required capital....
In 2020, we provided $1.4 trillion in liquidity, enabling the financing of approximately 6 million home purchases, refinancings, and rental units. https://spr.ly/6010H9aUI
Nice find! "We continue to view Fannie and Freddie as valuable perpetual options on their eventual exit from conservatorship due to their widely acknowledged irreplaceable role in U.S. housing finance." "Fannie and Freddie are building capital through retained
earnings as shareholders await a pivotal Supreme Court ruling."
No question SM had a lot on his plate, but also 4 years, tons of experts available, and he knew what he needed to do! But about 2.5 years in he changed his tune by insisting UST get a fair return on its investment, despite UST having hobbled the gses financially via the nws!
It seems like SM just left it to the next Administration to figure this out, his only concern being not to give them the free money every quarter! Even the USSCT understood it was a Nationalization of two private corporations, how could SM not do anything knowing that they are NATIONALIZED? My answer is what I have said repeatedly, that I highly suspect that he was ordered by DJT to keep the sweep in place (here via the Liquidation Preference) so the SCOTUS would have a live case and controversy on which to rule. All in an attempt by DJT to advance a more powerful POTUS via expansion of the Unitary Executive Principle and to throw a bone to the Federalist Society and a possible overruling of Humphreys Executor. SM like so many in the DJT administration were nothing more than "yes" people, which is why I guess you have a Unitary head of the Executive branch of government.
You are too kind to SM! He did so little for us didn't he? He basically took away the profit sweeps to UST so the next Administration couldn't have a slush unapproved from Congress spending account, while increasing the Liquidation Preference DOLLAR FOR DOLLAR!
I was thinking we could all chip in and we could have him sit on board above a pool of water with a sign that says "Maria, WE'VE GOT TO GET THEM OUT OF GOVERNMENTAL CONTROL!", we could charge people to throw a ball at a bullseye, and if they hit it, he drops into the water!
Okay, fair enough, DTAS, AOCI, AND Jr. Preferred ARE NOT considered CET1 under Basel 3 International Commercial Banking Standards! However, if the sole purpose of this 12.5 year bogus "conservatorship" was truly to be temporary and right the ship, couldn't the UST and FHFA agree to temporarily allow it to count as available capital? Can the approximately $12.947B DTA simply be used against Taxable Income and recovered in 12 months or less? I thought that the US Government was a not for profit entity with a goal of rehabilitation of the twins and not to maximize its profits, especially considering its unclean hands for during the 12.5 year "temporary conservatorship"?
Maxine is ready in a couple minutes to give the "evil hedge fund guys" a verbal spanking in public:
https://www.c-span.org/video/?508545-1/robinhood-ceo-reddit-founder-testify-gamestop-stock-part-1
But did she get a chance to visit her hair dresser this morning?
https://www.fanniemae.com/newsroom/fannie-mae-news/us-economy-expected-expand-67-percent-clip-2021
"the ESR Group projects mortgage originations in 2021 to hit $4.1 trillion, a $0.2 trillion improvement from its prior forecast."
https://www.fanniemae.com/research-and-insights/forecast/fiscal-stimulus-successful-vaccine-deployment-likely-boost-growth-also-pose-inflationary-risk
"consumers have built up over $1.5 trillion in “excess savings” over the past year, providing potential consumer spending power; the proposed stimulus bill will only further bolster the current unprecedented fiscal support. If virus-related conditions improve as expected and pent-up consumer demand can be realized, then growth has the potential to be even stronger over the second and third quarters than we are currently forecasting. Looking further down the road, if a brisk recovery occurs, the larger risks for our forecast, include greater upward pressure on inflation and interest rates than we currently forecast. A more robust upward movement in interest rates could: stymie growth later this year and into 2022; lead to varying degrees of asset repricing depending on their duration and the extent of speculative activity to date; and would likely be a significant drag on the pace of home sales and mortgage originations."
"However, given its size, even with our projected GDP path that exceeds this potential estimate, our forecast implies that much of this new fiscal support will result in a greater stock of household savings rather than stimulating consumption demand. This would likely also help to fuel further financial asset appreciation. However, if growth were to move higher than we are currently forecasting due to a larger degree of consumption spending, it would suggest stronger inflationary pressures building over our forecast time horizon and perhaps a sharper rise in interest rates due to the likelihood that the Fed would then begin tightening. Furthermore, while the economy often does operate above the CBO’s estimated potential level (it was modestly above in 2019), it usually does so only slightly – and historically it has not done so for long. In the past, once it exceeded this potential level, the next recession occurred within four years in every case since 1970."
"The rapid increase in home prices seen over the past year, up 11.0 percent in November per the FHFA Purchase-Only House Price Index, offsets most of the affordability gains from lower rates. Using the 30-year mortgage rate and the median existing home sales price, the estimated typical monthly housing payment in December was similar to that of the year prior. If mortgage rates were to move significantly higher, then home sales and house prices could quickly dampen, particularly in more expensive regions."
"at current interest rates, we estimate that 65 percent of outstanding mortgage balances have at least a half-percentage point incentive to refinance. This share is expected to shrink gradually as mortgage rates rise from their recent historic low."
Good time to dollar cost average down, looks like cap wealth avg price per share $2.95!
I think California requires all new single family homes to have solar panels installed, it seems to be gaining in popularity especially in the sunnier states. With battery backup it could provide some juice when the grid is down (but so do gas powered generators!).
Latest US New Residential Housing Data: "Building Permits
Privately-owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of
1,881,000. This is 10.4 percent (±1.2 percent) above the revised December rate of 1,704,000 and is 22.5 percent
(±1.8 percent) above the January 2020 rate of 1,536,000. Single-family authorizations in January were at a rate of
1,269,000; this is 3.8 percent (±0.9 percent) above the revised December figure of 1,223,000. Authorizations of
units in buildings with five units or more were at a rate of 557,000 in January.
Housing Starts
Privately-owned housing starts in January were at a seasonally adjusted annual rate of 1,580,000. This is 6.0 percent
(±16.4 percent)* below the revised December estimate of 1,680,000 and is 2.3 percent (±13.9 percent)* below the
January 2020 rate of 1,617,000. Single-family housing starts in January were at a rate of 1,162,000; this is 12.2
percent (±11.3 percent) below the revised December figure of 1,323,000. The January rate for units in buildings with
five units or more was 402,000.
Housing Completions
Privately-owned housing completions in January were at a seasonally adjusted annual rate of 1,336,000. This is 2.3
percent (±6.6 percent)* below the revised December estimate of 1,368,000, but is 2.4 percent (±11.0 percent)*
above the January 2020 rate of 1,305,000. Single-family housing completions in January were at a rate of 1,036,000;
this is 10.0 percent (±8.5 percent) above the revised December rate of 942,000. The January rate for units in
buildings with five units or more was 296,000."
Just remember these core facts: (1) the government clearly has unclean hands when it implemented the $308B nws and most likely the September 08, 2008 beginning of the Conservatorship (2) we will eventually get some relief from the courts (3) in the meantime we get to finally keep the income in the form of retained earnings instead of sending it over to the Treasury coffers (4) it's in the US governments best interest to have private capital in a 1st loss Position (5) to truly execute the gses' mission most effectively, they need to be returned to pre HERA condition (6) Conservatorships are suppose to be temporary and not to be used as a defacto Nationalization by the US government.
But if you don't think any of that is true, then you should sell.
All SWEPT INTO THE COFFERS OF THE TREASURY, WITH ZERO REDUCTION IN THE AMOUNT THE GSES' OWE! If that's not the EXACT OPPOSITE OF CONSERVE AND PRESERVE, I don't what is! I think the SCOTUS has figured this out, let's see what they do!
Let's see $4T * 1.5% = $60B, less $25B (as of 12/31/20), less $5B (retained earnings) by the time SCOTUS rules), less $20B (fnma take of $30B from SCOTUS) = $10B. Right? About 1 year of retained earnings? We are all kinda shooting in the dark here!
I think that's right! The letter agreement can easily be amended so long as the UST and FHFA really want them to exit the 12.5 year "Conservatorship". TH mentioned one possible scenario yesterday: "The next question is, “At what level of capitalization do you release the companies from conservatorship, under a consent decree?” That will be a subjective call made by the regulator. Again, if it were me I’d say no more than half the fully capitalized amount, which using my 3 percent figure would be 1 1/2 percent. And I would allow both companies to reach that 1 1/2 percent amount WITH an external capital raise; that is, I would say to each one, “Whenever you think you can raise enough common equity to hit the 1 1/2 percent threshold, you’ll be released from conservatorship under a consent decree (that both parties agree to) on the day that transaction settles, and you will then have a defined period of time (specified in the consent decree) to obtain the rest of your required capital, whether through retained earnings, issues of new common, or issues of new preferred (up to the maximum permitted by the capital standard).” We’ll have to see how the new FHFA director chooses to do this, but my way would get the recap done “reasonably fast,” to use former Secretary Mnuchin’s phrase. (It also would clear the way for a rapid conversion of the outstanding junior preferred to common, to allow Fannie and Freddie to issue new non-cumulative preferred at today’s much lower dividends.)"
Keep in mind, that if the UST and FHFA really wants to get this done, and there is a favorable Collins Plaintiffs ruling, I think they may finally be able to get out of total government control.
He also said that the companies would be in control of the recap, but I guess you forgot that part...We know he is a free market Libertarian who despises governmental involvement in private markets, if he survives post Collins, HE WILL RAISE THE MINIMUM GUARANTEE FEE ANOTHER 10 TO 25BPS as the outrageous 4+% cap rule will require it!
It's just accumulated retained earnings and/or stock issuance proceeds that ends up in one form or the other on the balance sheet on the assets side. Remember the basic formula for a balance sheet is Assets = Liabilities + Stockholders Equity, so the 12/31/20, $25B of stockholders equity or net worth is a positive $25B on the right hand side of the equation AS WELL AS a positive $25B on the left hand side or Assets. Here, assets include cash, marketable securities, MBS in portfolio, etc.
I always like what Warren Buffett said about the Government, IT'S YOUR PARTNER IN EVERY INVESTMENT AS HE TAKES OUT HIS CUT IN TAXES AND CAPITAL GAINS ON THE CORPORATION (and then he taxes your dividends and capital gains received on your personal income taxes when received)! Here, he took all the profits to the tune of $308B via the nws, but the SCOTUS may say that's a bridge too far.
David Thompson asked for a court order restraining Uncle Sug from taking profit sweeps in the future as well as returning the absconded $308B less the 18.9B/year in "interest", less the funds advanced equals APPROXIMATELY $30B for both twins.
When the Sovereign wants to take your assets, there's not too much you can do expect point to the state or federal Constitution and ask a judge for the sovereign to give it back! Here, Uncle Sug has been overly reluctant to do so, but I think the SCOTUS gets it, let's see what they do!
Nationalization is a risk usually only faced by Multinational Corporations doing business in foreign sovereigns (like Venezuela), that it happened here in the US, is like Judge Janice Rodgers Brown said, "Something that happens in Banana Republics, not something you would expect from the US GOVERNMENT"!
Seems like a done thing as virtually everyone agrees that it's going to raise costs in the housing market UNNECESSARILY! Unless the SCOTUS finds a way to save his job, I think the 4+% capital rule may not be around by the end of the year!
I hear you! Post Collins, I am sure the FA'S, may have something in mind! I am pretty sure YELLEN doesn't have any skin in the game or an axe to grind with the gses, but is cognizant that well capitalized gses, can do two important things: (1) help investment in LIHTC and other Biden agendas and (2) Assist in the somewhat elusive goal of the Federal Reserve to attempt to have a say over long term interest rates via gses MBS sales and purchases (doing what UST CAN to provide the market with a clear signal that the gses WILL have Governmental support AND show a commitment to helping capitalize the 1st Loss Private Capital position). SO LONG AS THE EXECUTIVE BRANCH OF THE GOVERNMENT WANTS TO HELP AND NOT HINDER FINISHING THE LAST UNFINISHED BUSINESS OF THE GFC, SHE CAN DO MANY THINGS TO HELP! We will have to see if the Executive branch wants to continue fighting tooth and nail on its anti-HERA position OR WILL THEY BE INTERESTED IN RIGHTING THE SHIP AS THEY SHOULD HAVE 12.5 YEARS AGO! Stay tuned!
"Decades of sluggish building has a left a generational shortage of inventory, while older empty nesters who might typically downsize have been wary of trying to sell suburban homes in a pandemic."
https://www.bloomberg.com/amp/news/storythreads/2021-02-16/what-will-happen-to-the-u-s-housing-market-after-the-pandemic
I think the most important thing is relief from the courts and almost as importantly cessation of the governments hostile attitude and a desire by the government to actually assist the gses instead of harm the gses. But we have to see what they do, in the meantime, if 2021 earnings are similar to 2020, Fannie Mae is earning approximately $32M/day!