Replies to post #718094 on Fannie Mae-No Politics (FNMA)

[kthomp19]

The January 2021 letter set aside $5 billion to settle lawsuits.

It's more nuanced than that. It said that Treasury won't allow release until all lawsuits other than those with a cumulative liability of $5B are completely finalized, either by settlement or final, unappealable court ruling. See the definition of "Litigation End Date" on page 3 of the January 2021 letter agreement.

I would quote it, but the pdf doesn't allow for copying and I don't want to type it all out manually.

I think that's the limit that Treasury will disburse in Judge Lamberth's court.

No. Treasury will disburse nothing in Lamberth's case no matter how it goes because Treasury is not a party to the case. The defendants are the GSEs themselves and FHFA. Any money disbursed in this case will come from Fannie and Freddie themselves.

This of course doesn't work out to 150% of par as has been often mentioned here.

The 150% of par number comes from the junior pref liquidation preference being breached (100%) plus 6% simple interest for every year since the NWS. By the time an award is handed down, assuming it actually happens of course, it could be as high as 160% because it will have been 10 years since the date of the NWS.

But then, those who have come up with that estimate haven't provided a basis for their none cumulative bonanza.

There, now you have one.

By the way, none of that calculation has anything to do with the juniors being non-cumulative.

I think (hope) 5th Circuit writes down the SPS to zero.

Hope is the right word, especially when the plaintiffs themselves advance conversion to common as an acceptable victory.

Taxpayers lose nothing by the writedown.

But they do forego the value of the converted seniors.