Replies to post #760158 on Fannie Mae-No Politics (FNMA)

[EternalPatience]

Sandra is going to change the buffer, after this comment period is over...

Guaranteed...

[kthomp19]

Also, it will be the dropping of the capital standard that releases us!

HERA specifically states that the lowest minimum (leverage, in the ERCF) capital standard is 2.5% of balance sheet assets. Don't take my word for it, read 12 USC 4612(a)(1) for yourself.

The ERCF uses "adjusted total assets" instead of balance sheet assets, which makes Fannie's leverage requirement 2.65% and Freddie's 2.9% when calculated on balance sheet assets.

I fully expect the next administration will have the FHFA head drop the capital standard to 3% or below. Not the current 4+%.

It's not 4% right now. It's 2.65% plus buffers for Fannie, 2.9% plus buffers for Freddie.

Then JPS will have zero legs as far as restructuring nonsense.

It's the senior prefs that must be restructured in order for FnF to exit conservatorship. Stop worrying about the juniors, it's the seniors that are the main danger to legacy common shareholders like you.

If released with adequate capital based on a new rule, no capital raises required to dilute and turn shareholders off.

The only way FnF can be released before 2026 is capital raises plus Treasury converting the seniors to commons.

If you think Treasury is going to write off the seniors instead of converting them to common then you are truly not paying attention to incentives or history.

JPS will stay as they are, common also. The only value that will be realized will be as we close in on an adequate capital number, which will propel the release.

FnF cannot hit their minimum capital requirements before 2040 unless Treasury restructures the senior prefs. That's not an opinion. And even if you're willing to wait that long, the seniors will still exist and could be converted at that time.

Now..... if you're a betting officianado, which share class jumps the most on release? (sans dividends, since that will be another year or so down the road)

You're putting the cart well in front of the horse. Release comes at the end, not the beginning, of all the recapitalization efforts including any and all dilution to the legacy common. Without a final share count your question is impossible to answer or even estimate.

The government knows it's in a catch22

What? They have won basically every court case and have full control of both the companies and their profits.

pissing off the shareholders, the market, or stealing to infinity is not how they get this done securely.

That's exactly what has been happening for the last 15 years. If that prevents release then FnF will stay in conservatorship forever.