Fannie Mae-No Politics (FNMA)

[Mnemonic]

One thing the "treat past NWS payments as paying down the seniors" argument misses is that if the seniors were to be paid off completely, the funding commitment would disappear.

Why would this be the case? My understanding was that the companies never exhausted the original funding commitment, which was whatever the companies drew initially plus $200B. I don't see why the PSPA's need to be eliminated just because the original shares are paid back. Hypothetically the companies could still draw on the remainder of Treasury’s funding commitment, and the liquidation preference would increase dollar for dollar for whatever they take.

Obviously this poses a problem if the NWS resumes after meeting capital requirements, but I think you and I both believe that the likelihood of that is very low. If there are draws between now and release, I'd expect there would have to be some modification to the dividend structure, maybe even reverting back to 10%. Treasury could also negotiate a periodic commitment fee for their support.