Replies to post #732541 on Fannie Mae-No Politics (FNMA)

[kthomp19]

If it were not for the NWS, the funding commitment would been terminated based on the profits. Why? Profits would have been retained each quarter to a point where the pps would exploded. When the balance sheet explodes, they will have to do something with the profits and cash. At that point, they would have to redeem the sps because the mission of the c ship is to nurse fnf back to health.

No, none of that makes any sense.

1) There is no reason to believe the funding commitment would end even after FnF hit their capital requirements and exit conservatorship.
2) FnF retaining profits has not resulted in the share price "exploding" in the last three years.
3) Price per share does not determine compliance with capital requirements.
4) Even if the NWS had never happened, FnF would still be well over $100B short of their capital requirements and would be 6 (Fannie) to 8 (Freddie) years away from reaching those requirements.
5) FnF cannot redeem or pay down the senior pref liquidation preference any time they want. The contract does not allow it.

But...the facts are today....the nws all went to dividends and we still owe the sps...we need to change that or hold them accountable for violating the covenants of good faith.....go figure

"Owe" is the wrong term regarding the seniors. They are not debt. There is no such thing as "repaying" equity.

About the implied covenant, that case can only result in FnF paying cash to shareholders. Nothing else.