Fannie Mae-No Politics (FNMA)

[Wise Man]

The PLMBS rallied after FnF were placed in Conservatorship, as we can see in this image, the trough date was three months later, then, a rally in price to the extent that Freddie Mac commented in a report, that it will halt the pace of PLMBS sales.
Freddie Mac posted in the 3Q2010 results an increase of $3,947 million in AOCI (Accumulated Other Comprehensive Income: unrealized losses in AFS securities. Equity), "primarily resulting from fair value improvements on available-for-sale securities". In other words, the PLMBS market was improving dramatically.
Maybe many billions worth of write-offs would have been avoided in the prior years, had they kept the position, or this sale at fire-sale prices was planned.


It seems that she made up this quote:

Another year later, at the end of 2007, defaults on private-label MBS were so high that the market was shut down entirely,

Subprime mortgage doesn't mean toxic mortgage. They are very profitable.
It was more damaging the Obama's MHA programs with the prior Incur Loss accounting, that made FnF set aside a provision equal to the concession granted to borrowers, not the actual expected credit loss. The same accounting rule that made Mnuchin millionaire, as his consortium got a rebate from the FDIC (loss-sharing deal) for this artificial loss in IndyMac and they ended up getting more money from the rebate than what they invested in the rescue deal. Hence, he was called "foreclosure king" when he found a gold mine with the foreclosures.
With the Amendment ASU 2011-2 approved on June, 2011, it's up to the enterprises to consider if a borrower that was current on its payments, is at risk of default. The objective was to increase the number of Troubled Debt Restructurings (TDRs) and saddle FnF with fabricated losses.

Also, take into consideration the robosigning case: the mortgage servicers (banks) were eager to foreclosure on fast, in order to protect the second-lien mortgage, a business stolen from FnF (collateral-sharing), as their Charter Act allows "to lend on the security of a mortgage" ($2T+ second-lien mortgages outstanding should be repurchased to avoid another robosigning case and boost the banks' battered Balance Sheets)

Some PLMBS were sold with fraudulent information. Hence, the $203B porfolio lawsuit against the Allies (18 financial institutions). A $25.5B settlement.
The PLMBS was an illegal product as it lacked one of the enumerated Credit Enhancement operations in the Charter Act. Instead, a small UPB was covered with purchase of CDS (Credit Default Swaps) which is illegal, as it isn't authorized in the Charter Act (many insurers went bankrupt by the way: Ambac, etc.). This was solved with the Commingled Securities unveiled in June 2022 (100% guaranteed against default. Number 3 in the Credit Enhancement clause).
Today's Credit Risk Transfers (CRTs), but the PMI (Number 1 in the aforementioned clause), are illegal too. This is why it's been requested a $20B cash refund and a $20b posting in the Retained Earnings account (CRT expenses, net. After the payment of Income Tax)

Finally, outside the PLMBS, there was another fraud to FnF in the sale of mortgages individually. The famous "representations and warranties" or "putback demands", when FnF force the sellers of mortgages to buy back the mortgages sold with fraudulent information.
It was memorable the settlement with Bank of America. It agreed to pay $1.28 billion to Freddie Mac on the effective date December 30th, 2010 and $1.52 billion to Fannie Mae, over Countrywide repurchases.