Fannie Mae-No Politics (FNMA)

[HappyAlways]

Just reviewed the amendment by Steven Mnuchin and Mark Calabria in Jan 2021. They are really no friend to FnF shareholders. In one hand, they talked about releasing the GSEs. But, look what they did to FnF shareholders.

Key terms of the agreements are:

Extend Capital Retention: Replace the variable dividend (i.e., net worth sweep) with alternative compensation to permit the GSEs to continue their recapitalization efforts. As compensation to Treasury, the liquidation preference will increase by the amount of retained capital until the GSE has achieved its regulatory minimum capital, including buffers (referred to as the capital reserve end date).
Upon the capital reserve end date, the GSEs will resume quarterly dividend payments. The dividend amount at that time will be equal to the lesser of 10% of the liquidation preference of Treasury’s senior preferred stock, or the incremental increase in the GSE’s net worth in the prior quarter.
Before the capital reserve end date, Treasury and the GSEs will determine a periodic commitment fee for Treasury’s remaining funding commitment, to compensate taxpayers for their risk in supporting the GSEs.
Treasury Establishes No Exit From Conservatorship With Less Than 3% Capital: The letter agreements provide that there will be no exit until all material litigation relating to the conservatorship is resolved or settled, and the GSE has common equity tier 1 capital of at least 3% of its assets.
Allow for Common Stock Issuance at Appropriate Time: Treasury will allow each GSE to issue common stock upon the achievement of future conditions: first, Treasury must have exercised in full its warrant to acquire 79.9% of the GSE’s common stock, and second, all material litigation relating to the conservatorship must have been resolved or settled. Treasury will permit up to $70 billion in proceeds of stock issuances by each GSE to be used to build capital.

Treasury Department and FHFA Amend Terms of Preferred Stock Purchase Agreements for Fannie Mae and Freddie Mac