Fannie Mae-No Politics (FNMA)

[nats1]

Good morning YanksGhost - Even in the case of the high yielders with long redemption intervals - and a have a few shares of these - I am in the conversion camp. Why? I believe Nomura and some of the other analysts are making the observation that, even after the cap raises, its expected that they may go a couple of years or so without issuing dividends to build up more capital. This makes a lot of sense to me. So no dividends until perhaps late 2023 or in 2024. Even if the high yielders begin to receive them, it will be short-lived as the GSEs would redeem them as soon as possible. I would rather be converted now at a favorable rate than take my chances 3 to 4 years from now and perhaps not even get to the point where I get any dividends before I would receive par. I can see why you may disagree with this, but my sense is that the majority of the large preferred holders would rather convert now, regardless of series. Besides, its good to be in a position where you would only take the conversion deal if its favorable or just wait for redemption at par. Sort of like having a 30 year fixed rate mortgage in this environment of falling rates. You can tell the bank - sure I'll refi if you make it worth my while! Or sit on the rate you have if you are happy with it. (I am looking for 1.9% 30 year fixed rate Jumbo with no closing costs. Don't laugh - its coming!)

Nats