Fannie Mae-No Politics (FNMA)

[kthomp19]

There was no contract remedy, which means the language in the shareholder contract was not updated as a result of the Lamberth ruling. All expectations on both sides of the shareholder agreement remain intact.

Wrong. Investor expectations as of the day before the NWS only included the original SPSPAs and the first two amendments (which only increased the funding commitment size). Before the cash NWS, FnF had a clear path to building capital: earn more per year than the 10% cash dividend on the LP. The timing of the cash NWS was in response to this very thing being about to occur in 2012.

Investor expectations as of the day before the LP ratchet included the NWS itself as the then-status quo. That's a world of difference. The cash NWS made it impossible for FnF to ever build capital and escape conservatorship; this was one of the purposes behind it.

Lamberth said that investor expectations are not set at the time of original contracting but instead are updated with every relevant updates, which he specifically said includes the SPSPAs and amendments to them. An investor who held shares just before any the LP ratchet letter agreement had their expectations in part informed by the existence of the cash NWS.