Fannie Mae-No Politics (FNMA)

[big-yank]

No dividends, preferred or common, can be paid other than to the government while the SPSPAs remain in effect under conservatorship. It is premature to consider dividend options until this shackle gets removed from Fannie & Freddie.

The problem with pending cases seeking dividend restoration is that a court can order the government to restore shareholder dividends on a parity or other basis with swept proceeds under either SPSPAs or Amendment 3, but the court cannot order UST to maintain the other parts of the arrangement if it chooses to exercise its right under the terms of contract. If UST balks and ends its $400 B draw backstop, neither GSE has sufficient reserves with which to pay out any dividends to anyone. It's a Catch 22.

So my advice is to keep your powder dry on divvy expectations until the situation gains some clarity. I believe both common and preferred shares could have enormous divvy returns at some point in their future. I'm just not counting on divvies anytime soon.

Great question.