Fannie Mae-No Politics (FNMA)

[kthomp19]

I appreciate the detailed analysis here, but unfortunately it's moot.

Section 6.12 of the original SPSPAs reads (emphasis added):

6.12. Non-Severability. Each of the provisions of this Agreement is integrated with and integral to the
whole and shall not be severable from the remainder of the Agreement. In the event that any provision of
this Agreement, the Senior Preferred Stock or the Warrant is determined to be illegal or unenforceable,
then Purchaser may, in its sole discretion, by written notice to Conservator and Seller, declare this
Agreement null and void, whereupon all transfers hereunder (including the issuance of the Senior Preferred
Stock and the Warrant and any funding of the Commitment) shall be rescinded and unwound and all
obligations of the parties (other than to effectuate such rescission and unwind) shall immediately and
automatically terminate.

In order for 6.12 to ever matter, we would have to have two things:

1) part of the Agreement, Senior Preferred Stock, or Warrant would have to be determined to be illegal or unenforceable
2) Treasury would choose to declare the Agreement null and void

Your post was an excellent breakdown showing that #1 has never happened and is unlikely to ever happen.

However, #2 is the real reason 6.12 is irrelevant. Even if part of the Agreement, Senior Preferred Stock, or Warrant is determined to be illegal or unenforceable, why on earth would Treasury choose to unwind the whole Agreement?

That choice would involve them sending FnF hundreds of billions of dollars in cash on top of writing assets they value at over $220B (the senior prefs and warrants) down to zero, along with losing veto power over FnF's exit from conservatorship among other things. All for absolutely nothing in return.

I have yet to hear any reasonable explanation for why Treasury would choose to do this.

As such, the inevitable conclusion is that Section 6.12 of the SPSPAs is a complete nothingburger. There is no reason to believe it will ever be invoked.