Fannie Mae (FNMA)

[kthomp19]

Can you elaborate? I'm not quite following you here.

Back before the September 2019 letter agreement stopped the cash sweep, FnF had paid Treasury about $125B more under the NWS than they would have if the NWS had never happened and the 10% dividend rate was still in effect.

But the last time FnF paid cash to Treasury was June 28 2019. If the NWS had never happened FnF would have paid $18.7B per year to Treasury: $65B total in the 3.5 years since.

That offsets some of the $125B overpayment Treasury has received, meaning a NWS unwind right now would only involve a cash repayment of $60B to FnF (I had mistakenly put $64B in my previous post).

The key point here is that the $60B overpayment number goes down by $18.7B per year ($4.67B per quarter) because FnF would still be paying $4.67B cash to Treasury every quarter if the NWS had never happened. Assuming nothing changes, in early 2026 the crossover will happen where a NWS unwind would involve no cash transfer from Treasury to FnF. After that, the unwind would involve FnF paying Treasury even more cash!

The senior pref liquidation preference is what explains the difference. Any NWS unwind will reset it to $187B, which would be a greater drop 3 years from now (when a NWS unwind would involve no cash payments) than right now.