Fannie Mae-No Politics (FNMA)

[FOFreddie]

Ackman had FNMA being released at the end of 2026 and FMCC being released at the end of 2027. It would seem that there could have an earlier release for both if the agreed to a Consent Decree to meet Min Cap requirements. Ackman assumed a 2.5% level but the ERCF CET1 min requirements are $ 140 bn for FNMA and $ 108 bn for FMCC - big issues are the treatment of the SPS, warrants, settlement of Litigation and the potential for Consensual JPS conversion. My assumption for FMCC is that the $ 14 bn of JPS needs to be converted to minimize new capital to meet the $ 108 bn. It will be done on an average trading period price at some discount to incentive conversion and that there will be a rights offering to raise any additional capital needed after the JPS conversion to meet the ERCF CET1 Min Requirements. Perhaps the Cap levels will be lowered as Ackman and Rodney have suggested but the current requirement is the ERCF CET1 Min Requirements which means that CET1 can only be met with common stock. We need the price of FMCC to rise to lower dilution.