Here is what the future holds for the GSEs
The "process" of steps that will be taking place over the course of the next year are:
1. FNMA and then FMCC will both be allowed to use their DTAs. From both an accounting rule and a matter of due process for having been given a loan by the govt. and having the ability and means to pay it back, it WILL be applied against the debt balance owed.
2. There will be much chatter/discussion both pro and con on the merits of the GSE's remaining public entities serving the mortgage market. What hasn't happened in 4 years is any analyst, congressperson speaking out as to the "now" viability of the GSE's being able to continue as is, now that they are profitable and with proper regulation,,,,,,,,,,,these folks will come out of the woodwork in defense of the GSE's now.
3. Upon congressional leaders uniting to dismantle the GSE's in a much more loudly manner, there will be a class action lawsuit on behalf of shareholders of each GSE's citing breach of 5th Amendment rights to government seizure without paying market value.
4. There will be new data released on the INCREASE in the value of assets both GSE's own...........All investors/congress has heard is the endless hole of market devaluation of the GSE's assets. With $5 Trillion mkt value of mortgages in 2008, a 30% decline of value was $1.5 Trillion. Note that much of this is just "mark to market"' accounting adjustments each quarter....What has been happening since the middle of 2012 is and INCREASE in the value of the their mortgage holdings......a 10%-20% increase in overall portfolio value would be $350-700 Billion.
We are now entering a sustained period of " mark to market " valuation increases. As such the Balance Sheet and Cash Flow generation of the GSE's will be markedly large in the coming quarters. Because of this, there will be strong language in favor of only reforming the GSE's and keeping them in tact, not dismantling them.
