Fannie Mae-No Politics (FNMA)

[chessmaster315]

This indicates you either do not understand this company OR you dont understand what "non cumulative"
preferred means, or both.

In most quarters, Fannie earns plenty to pay not only preferred shareholders, but common shareholders a dividend also, that is, if the government does not confiscate all the dividends from both common and preferred shareholders.

There has not been an instance when fannie mae paid out dividends to preferreds, but there was none left to pay common shareholders also a dividend. Fannie is a very profitable company, owning about 3.43 trillion dollars in mortgages. Most of these homeowners make payments each month. Some default. However, there is a principal called "the law of large numbers" which applies to fannie and to many insurance companies.

Fannie knows that "all" homeowners are not going to default on their home loan at once. Most never do. Just like insurance companies know that all of their insureds homes wont burn down at once. Yes, both of these things CAN happen, but it probably wont matter anyway, if some catastrophe wipes out the earth, such as an asteroid.