Fannie Mae-No Politics (FNMA)

[FOFreddie]

Glen - the last time any funds were advanced was in 2018. The Liquidation Preference is to structured to give the FHFA absolute control over any restructuring and was done before Collins. Collins just reinforced that control and was an unexpected ruling at the time of the last letter agreement executed by McNuchin.

The SPSA's have a waiver provision - this is from F-62 of the last 10-K

Waivers and Amendments
The senior preferred stock purchase agreement provides that most provisions of the agreement may be waived or amended by mutual written
agreement of the parties. No waiver or amendment of the agreement, however, may decrease Treasury’s aggregate funding commitment or add
conditions to Treasury’s funding commitment if the waiver or amendment would adversely affect in any material respect the holders of our debt
securities or guaranteed Fannie Mae MBS.

The UST may have justification to argue that they provided adequate consideration for the Liquidation Preference for funds actually advanced which I believe was about $ 120 bn but there is not consideration for any additional preference amounts. There will be grounds for new takings and constitutional challenges if the UST attempts a conversion. Alternatively the UST could exercise the warrants and use sales proceeds to pay down the $ 120 bn over time. The UST and existing common will be diluted by sales of new shares but there is no clear incentive to attempt a conversion before a public fundraising.

In the end the UST will waive all or part of the Liquidation Preference to get the deal done and in fact will probably maximize its value since it will reduced the required IRR required by new shareholders since such a waiver will be deemed fair and reasonable which is consistent with Calabria's perspective in his CATO paper.