Fannie Mae-No Politics (FNMA)

[Wise Man]

Howard and Stevens haven't read the Charter Act dynamics yet, where FnF can't buy MBS or any asset, unless it complies with the clause Credit Enhancement.
FnF are forbidden to buy any security or underlying mortgage, where the mortgage exceeds 80% of the value of the property that secures it (Maximum 80% LTV). The property is the collateral of the mortgage, but FnF are compelled to sell NPL and RPL and even the REO inventory, to their cronies instead.

Unless, this security or underlying mortgage has one of these credit enhancement operations:
(i) The portion of the mortgage (credit risk) that exceeds 80% LTV, is guaranteed by an insurer (The borrower buys PMI)
(ii) The seller retains a participation in the mortgage of more than 10%.
(iii) The seller guarantees 100% the mortgage against default.

This is why the PLMBS were illegal and thus, subject to mispricing in the run-up to the 2008 financial crisis, and fraud (PLMBSs sold to FnF with fraudulent information. For instance, the lawsuit filed by the FHFA on behalf of FnF about a $202 billion PLMBS portfolio and against 18 financial institutions)
For the same reason, the current Credit Risk Transfers (CRTs) are illegal, as it's not a valid credit enhancement operation among the ones enumerated. The shareholders are requesting a refund of the CRT expenses, net (turned into Retained Earnings. The Core Capital that protects FnF) and it's been included in the assessment of BVPS in the case of a Takings or, otherwise, part of the $152B cash refund from UST-FHFA. Likely, the CRT expenses are a backdoor Commitment Fee, barred in the Fee Limitation clause of the Charter Act.
The mortgage-related investment portfolio filled with these illegal PLMBS (more than $1 Trillion), had to be reduced 10%/15% per year when conservatorship began.
The mispricing of these securities was one of the reasons of the conservatorship (AOCI line item in Equity. Unrealized losses), this is why Howard's assertion that "those portfolios were extremely profitable" is laughable.
Once in Conservatorship, these PLMBS skyrocketed.

The Resecuritizations is a security that would fill the void, complying with the Credit Enhancement (iii) (Too bad that the Charter is no longer necessary, as we are bound for a Privatized Housing Finance System). It's the so called "catastrophic-loss reinsurance", where a guarantor bundles the UMBS guaranteed by other guarantors into "Supers", sold to investors, and the insurance claim isn't paid until the guarantor files for bankruptcy. It can be Government reinsurance or private.
The security was launched by Freddie Mac in June 2022 and it was priced at 9.375 bps.
It can be used for the option 3 in the 2011 UST-HUD Housing Finance System revamp, with a Government Catastrophic-Loss Reinsurance. Or private reinsurance for the options 1 or 2.
A 3-option plan as "recommendations on ending the conservatorships, no later than January 31, 2011", at the request of the Dodd-Frank law.
The 3 options imply a Privatized Housing Finance System, with "stringent capital requirements", known as Basel framework. Hence, the February 16, 2021 Capital Rule (ERCF)
FnF would meet all the capital requirements even after the redemption of the JPS (Fannie Mae $1B short of Tier 1 Capital for the Leverage ratio, but as of end of June, 2023. No big deal today, end of Q3). Also taking into account that it's expected the amortization of the Deferred Income into earnings in one fell swoop, with an Accounting standard change.
Therefore, the UST backup of FnF upon "Capital deficiency" (negative Net Worth) is no longer necessary and the Charter would be revoked. Also, the Charter's Public Mission isn't necessary, as FnF no longer subsidize the guarantee fee thanks, in turn, to the UST backup of FnF, and their countercyclical role in the Secondary Mortgage Market as stated in the section Purposes (Step up buying mortgages. It isn't about refinancings and loan modifications.) is only in a financial crisis, not in an economic crisis. This is why the plotters attempted a banking crisis in 2023 after having been allowed by the Federal Reserve in a Schedule for the U.S. banks about how to fill out a Balance Sheet (FR Y-11. Schedule Balance Sheet reporting. General instructions. December 2020), to commit Accounting fraud with the unrealized losses (AOCI) in their investments in debt securities, unaccounted for, as they are held in HTM portfolios (unlike FnF for their PLMBS portfolios, commented above). Thus, there are only 2 options, not 3 as the Fed pointed out in the Schedule, for the valuation of investments in debt securities. It seems that this problem will be solved on October 1st, with the new Capital requirements by the Fed, as they tackle these unrealized losses that don't show up in Equity.
The prior liquidity crisis attempt in December 2018 with Mnuchin-Powell (Mnuchin phoned 6 bank CEOs, etc) failed. Powell, in this second attempt, suceeded, but not with FnF that have their interest rate risk hedged and their investments valued at fair value.