Analysis of the liquidity in FnF.
In the midst of a banking crisis caused by a liquidity and solvency crisis, it's worth having a look to this analysis posted every quarter since many years ago.
Fannie Mae has reduced its Restricted Cash in Q1 from $33B held since long time ago, to $21B, reinvested in Securities Purchased under Agreements to Resell. This is why its Liquidity ratio increases from 3.5 to 3.8.
This analysis is also key if the shareholders are proposing a Leveraged Buyout of FnF.
A Liquidity ratio of 1 to cover a credit crunch event, is a normal ratio.
Then, their business requires more liquidity to repurchase delinquent loans from their MBS Trusts, that won't be recovered until the end of the Loan Modification trial period where, if it succeeded, the loans are bundled into MBS again (RPL), instead of being sold to Goldman Sachs & Co at a deep discount like nowadays, or, in NPL, the sale of the collateral after taking possession (taking into consideration the rebel states, where the courts delay the foreclosures).
Assuming that the Restricted Cash is pledged for the redemption of the JPS, we could be talking about $80B in Freddie Mac and $75B in Fannie Mae of spare Liquidity that can be monetized for the acquisition of the common stocks (the Private Equity firms use debt to acquire the companies and later they use the Assets to service the debt. In this case, due to spare Liquidity, they pay off the debt on day one).
With less Assets, FnF aren't leveraged if, at the same time, FnF redeem their JPS which are obligations (debentures recorded in Equity).
