Fannie Mae-No Politics (FNMA)

[Rodney5]

Based on the terms of the Senior Preferred Stock Purchase Agreements (PSPAs) as originally and subsequently written, the senior preferred stock is considered non-convertible preferred stock. Therefore, the U.S. Treasury cannot unilaterally convert it into common stock based on the existing contract. The PSPAs do not include a specific clause for such a conversion.

Here's a deeper look at why this is the case and how it relates to conservatorship exit strategies:

Non-Convertible by Contract: The SPS was designed as a non-convertible security to provide the GSEs with financial support during the 2008 crisis. It is a debt-like instrument that provides priority for dividend payments and claims in the event of liquidation, but offers no pathway to become common equity under its original terms.

If and when the warrants are exercised all or in part this is considered a new injury and the clock starts ticking again on Statute of Limitations.