Fannie Mae-No Politics (FNMA)

[JOoa0ky]

Capital Stack o Capital Stack...

Some of these JPS have horrendous rates paying less than one percent.

The argument is no new investor will come in until the capital stack is cleared... but my question to those who think so is:

If the plan is to clear the stack and then later on issue new prefs, why would you clear the less than 1% JPS and then turn around later on to offer ones at a higher rate?


Imagine if you were lucky enough to have a mortgage with less than 1% interest rate. WHY ON EARTH WOULD YOU EVER PAY THAT OFF EARLY.


The smarty pants out there will say the new investors don't care because it just dilutes the commons and doesn't affect them if it gets cleared beforehand.
- But oh it does. The higher rate for the new JPS in the future affects ROIC. Future EPS will be lower.


I would leave it in perpetuity. Has nothing to do with JPS vs Commons. Pure unadulterated capital allocation decision.