Fannie Mae-No Politics (FNMA)

[DaJester]

"Wrong. Before the letter agreement in September 2019 that started the LP ratchet, the amount of capital that FnF were allowed to retain was only $3B per company. Anything above that would be swept to Treasury."

Which we now understand was an improper agreement. Every agreement that follows was based on this sweep.

"As a result of the letter agreements, FnF were allowed to retain more earnings than they would have under the terms of the Third Amendment. That is the consideration FnF received in return for the liquidation preference ratchet."

So... FNMA/FMCC can retain up to a higher capital amount, and in consideration for NOT sweeping your profits in cash, the Treasury will just increase the LP dollar-for-dollar. Again, this new consideration is is based on a sweep that was not a fair contractual obligation to begin with.

Hypothetically, if you remove the improper NWS (violation of fair dealing), then the 10% dividend would be in place. The profits after the 10% dividend would be in retained earnings up to whatever limit is set. The LP increase is clearly a variation of the NWS and totally unnecessary for the retention of capital.

In the 4th Amendment, the Treasury planned to continue the NWS after reaching the capital buffers by way of the "Lesser of 10% or company's net worth". That's still in place, so of course they want the LP to be enormous so even collection on 10% of the LP would mean giving all of the profits to the Treasury in perpetuity. This may have worked, except for the court win stating that a NWS is a violation of fair dealing. As they try new iterations of NWS, I expect them to be challenged.