Fannie Mae-No Politics (FNMA)

[kthomp19]

JPS does not help meet the ERCF Tier 1 Equity requirements - either there is a new ERCF that is low enough to meet existing capital, they wait until earnings are great enough to meet an ERCF or they raise additional capital.

Right, except for one minor nitpick: the juniors don't count towards CET1 capital. They do count towards Tier 1 and core capital.

The JPS lawsuits have been pushing for conversion for years and they are likely going to continue to push as part of a settlement.

That makes perfect sense. Nearly all of the major lawsuits have been funded by junior pref shareholders, and the path to them making the most money involves an exchange for commons.

The FHFA could wait out the lawsuits but why would they want to wait - converting the JPS clears up the balance sheets and litigation and prepares the GSEs to EXIT.

Right. There are plenty of good reasons to exchange the juniors for commons.