Replies to post #713992 on Fannie Mae-No Politics (FNMA)

[FOFreddie]

Agreed - JPS Par plus past divs are really small potatoes in the future captial structure of the GSEs. The CBO has an Equity Value of $ 434 bn and a 2025 outside capital requirement of appoximately $ 75 bn. JPS Par is around $ 30 bn and even if you inpute a 6% div since 2013 you are looking at a JPS value of approximately $ 50 bn in $ 434 bn projected equity value. Common should get its 20% as a settlement ( 434- 75 -50 ) which would be about $ 62 bn between FNMA and FMCC. The UST would be left with about $ 250 bn before the required dilution to raise outside capital which also would impact common in the near term.

The cramdown path is totally unreasonable and is financial malfeasance. The biggest risk to the UST net equity value is the Duration risk in the required rate of return for outside capital whether it is common or preferred. The underlying GSE portfolio has negative convexity ( which is great since weighted average lives of guarantee fee income streams will extend as rates rise) but any new JPS or the required rate of return to new equity has gigantic duration risk. Treat everyone fairly and start raising capital now while interest rates are still low.

[Robert from yahoo bd]

So you are saying that the jps liquidation preference disappeared during the conservatorship?

Is it not true that in the event of receivership/liquidation the jps holders would be entitled to any proceeds after assets are liquidated (seems unlikely given they are the backbone of the US Secondary Mortgage Market) less outstanding liabilities?

Are you not assuming that but for the transfer of the $308B cash sweeps from the gses assets to the coffers of the UST, the jps holders would have received full or partial dividends since August 17,2012?

Does it really seem like a legendary Judge like Lamberth wants to figure all these things out or will he punt again as the federal courts seem to have taken with the shareholders with yet another pyrrich victory for the beleaguered nationalized shareholders?

[curious999]

spot on