1. I am an investment banker.
2. I am a long term value investor and the next 30+ years we are already in the beginning of a US new home construction boom.
3. Fannie does the bulk of the 70+% of current buying of mortgage of banks books and packaging and selling them for huge profits, accelerate this process considering the speed of connectivity and global platforms to access the secondary market for MBS and you have lending that reaches the mass demand for new homes and lower mortgage rates where 6% is not that bad.
4. Banks and Fannie doing this process at a faster speed on 2024 connectivity than 2008, and going into conservatorship Fannie did the bulk of just 30% with Freddie doing the lesser and they were competing with private-label MBS. Now they are a monopoly.
5. The Banks - big ones - buy MBS too. JPM, Citi, and BoA have been buying many MBS in February after 18 months of not touching them. They are buying CLOs too.
6. Doing the bulk of >2x the 2008 Fannie and Freddie purchase of mortgages off the lenders books and selling to a less globally accessible market and slower connectivity means the great 70% + and the faster velocity of this process that makes banks and both FnF very quick profits and the ability to issue mortgages and construct as many houses as needed - the most seen since 2005-2006 and the thousands you can see in 2024 builds by Lennar in the west end of the commuter rail to Chicago at the three furthest points and beyond North to South from the SW, West, and NW end of Chicago's Metra terminus? Literally all have listed prices too, and I drove by and saw building be done in 20 degree weather in February 1 week... There is a factor of acceleration and the great share of the bigger brother (Fannie) that will keep it earning more than Freddie when the two are privatized and in a homebuilders new construction boom.
That's the easy explanation. These are business operations you have to go beyond just looking at the earnings under a 16 year pause in new home construction as well as the fact the earnings are going to crush you're "Freddie earns more money per share"...
So I know you buy more Freddie, that's fine, but Fannie is going to crush earnings and provide far more profits for banks and by selling MBS at a greater rate in a faster moving environment. That's economics. That's also looking at the operations in the environment they are being rehabilitated for.
Bullish
