OUR NEGOTIATOR PROPOSES TO SACRIFICE THE FNMA HOLDERS, FOR THE GREATER GOOD: THE RESOLUTON OF THE FANNIEGATE SCANDAL.
In a Taking of our stocks, they would only receive $75ps, far lower than the $124 using Relative Valuation with FMCC and $131 applying the "UST's breakeven price for a Taking" principle (Taking at $0 cost for the UST, at it would be using the shareholders' money, that is, the money that should be in their Balance Sheet had it not been a secret plan: recent Retained Earnings currently escrowed due to the SPS increased for free, plus the UST net refund of the amount owed to FnF, that is, held in escrow too)
For FMCC, it's been used this principle ($170ps), which is based on the Charter's Fee Limitation, that bars the UST from making profits using the assets or securities of FnF, other than a rate similar to Treasuries on redeemable obligations (the SPS fit in this definition)
Then, in the Relative Valuation we have taken into consideration their Deferred Income or Unamortized Premiums, currently recorded as debt instead of Equity (earnings), that is, earnings assessed and collected now in limbo, that are amortized into earnings during the life of the loans (then, the driver is the probability of these loans being prepaid with the refinancings, when the loan disappears and a new one is originated). These earnings are the upfront g-fee.
FMCC holds a disproportionate amount of Deferred Income ($64.2B), versus FNMA ($24.9B), as of end of March 2022.
These Unamortized Premiums can be amortized into earnings in one fell swoop, under the Revenue Recognition principle, because this g-fee is for a service delivered on day one, as FnF cover 100% of the credit losses as of day one.
Because the Price-Earnings ratio represents how many years it will take for an investor, to recoup the investment via earnings, it makes sense to include this Deferred Income, assuming that the UST would amortize it into earnings in full, in one fell swoop.
Then, it would be paying a PER of just 2.3 times (*) for the FMCC stocks. Applying this ratio to FNMA, we get $75 per stock.
(*)Adjusted annualized 1Q2022 EPS, 3.5% dividend on the JPS included, the UST pays no Income Tax.
LONG LIVE THE FNMA HOLDERS.
AI
