Replies to post #3979 on Fannie Mae Preferred S (FNMAS)

[Joe Stocks]

Maybe I agree with that, but what you (and Geithner) may be missing is that the relationship was not devised by us.

I report something that Geithner said and some how you turn that around that Geithner and I are missing something?

Should that not be better said; "Maybe I agree with that, but what Geithner may be missing is that the relationship was not devised by us." and leave me out of it. All I am saying is that I think what the Treasury Secretaries words are important no matter what you think or not as it gives us a glimpse of what the future may be for FnF. We can talk all we want about possible scenario that we think should happen, but what the US Treasury thinks and the action they take trump us all.

Don't you wish we could have a sit down meeting and ask Lew point blank what he thinks is the end game?

[jwnoble3]

I think its good to review the 3rd amended Sr Pref agreement

See pg 6 specifically. TSY draws the line at no point will they require FMCC to hold less than 250B in Mort. Assets. Also they suspended the periodic commit fee (both good news to me)

http://www.treasury.gov/press-center/press-releases/Documents/Freddie.Mac.Amendment.pdf

Also, at this point they are going to allow FMCC little capital reserve
http://www.freddiemac.com/investors/er/pdf/2012er-3q12_release.pdf

On August 17, 2012, Freddie Mac, acting through FHFA, as Conservator, and Treasury entered into a third
amendment to the Purchase Agreement. This amendment, among other items, replaced the fixed 10 percent dividend rate with a net worth sweep dividend and suspended the periodic commitment fees (both beginning in 2013). Under this amendment, Freddie Mac will be required to pay dividends to the extent that its net worth exceeds the permitted capital reserve. The amount of the permitted capital reserve will be $3 billion in 2013 and will be reduced by $600 million each year thereafter until it reaches zero in 2018. The amendment effectively ends the circular practice of taking draws from Treasury to pay dividends to Treasury

I believe at the ~250B Mort Asset mark a much smaller FMCC is to be re-capitalized w/private capital with Congress charter removed as well and TSY holding warrants for 79.9% to continue to sell off over time.

[44centsAKAchoccake]

Well, I think that part of what the FHFA is working on is "guarantee portability," i.e., various entities including FnF and others could get a "guarantee" from Tsy if the mortgageholder pays the 25 bp or 50 bp or whatever. There would be a process for deciding which mortgages will get a guarantee.

I think a guarantee will stay in some form. In the past, Tsy has provided a guarantee without being compensated for doing so. In the future they may provide a guarantee for which they get paid a fee. With good credit screening and so on Tsy could make good money on this.

Granted, once every 20 years there will be problems in the mortgage and housing markets and Tsy and others will take a hit.