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Sunday, July 17, 2022 9:41:58 PM
(1) the recap shortage favors Freddie: Freddie is a bit closer to its minimum recap target than Fannie is, according to Timothy J Howard (former FNMA CFO). I’m nowhere near a finance expert, so I defer to TH’s blog.
(2) the current contract claim litigation could cause a ‘fork in the road’, putting Freddie further ahead to stay. How?
The USG’s current brief in the DC Circuit argues that the state of Virginia (Freddie’s domicile) has never truly adopted the doctrine of breach of implied duty of good faith (in VA’s common law of contracts).
My Observations?
(a) I think this is the first time that this key issue has been formally raised. That might suggest it’s a hard row to hoe; but another thought is that for public policy reasons, the USG did not want to stick this likely recap-fork into the ground— until it was absolutely necessary.
(b) Delaware’s adoption of this doctrine—particularly as a stand-alone claim*— is not accepted by all states(!!!)
So, in this scenario, Freddie commons likely lose on summary judgment in the DC District (as a matter of law). Any appeal would be a waste of ink (such polar-opposites are a favorites of courts for efficiency reasons- and thus rarely misunderstood). Given more uncertainty toward the FNMA contract merits outcome, Freddie gains now an incremental legal lead, on top of its financial lead.
Hmmm.
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