Fannie Mae-No Politics (FNMA)

[YanksGhost]

You are basing this on Carlos's lame "voluntary concession" premise which fails because failure to make the concession creates a realized loss in default and foreclosure sale. Additionally, the GSEs were instructed by FHFA to prioritize loan restructuring and modification to keep mortgagees in their homes during the crisis. These actions were NOT voluntary.

Capital can only be derived from retained earnings of via stock sales. Fee-created money can not be counted as Tier 2 Capital in any certain way. Even Carlos recognized several options, apparently and desperately seeking some way that common stockholders could gain some tangible benefit. But the fact remains that loan loss reserves are amassed during good times, as you previously stated, and can only be reduced if the dimension of risk in the portfolio is reduced... not the case as the GSEs share has been engorged during conservatorship.

Just to refresh the memory...

https://seekingalpha.com/article/4025572-fannie-mae-accounting-shenanigans

This 2016 piece has never gained traction with FHFA or FNMA or FMCC. Please understand that a loan loss reserve is not retired when a loan is paid off because its is not held as a surety payment. It is a fee for bearing the risk over the term of the loan. That is also why it is not considered income or lumped into retained earnings. That's how accounting works!