Luke 532

Mark Calabria, chief economist for Vice President Mike Pence, will provide an insider view of President Donald Trump's economic agenda during a luncheon session during NAFCU's Congressional Caucus Sept. 11. https://www.nafcu.org/News/2017_News/August/Pence_economist_Mark_Calabria_at_NAFCU_Caucus/ NAFCU: "The GSEs should be allowed to rebuild their capital buffers." (see attached document) NAFCU_on_GSEs.pdf

This hints at what I believe to be a substiantial risk- settlement with only certain shareholders (plaintiffs) while concurrently stopping the shares from trading. Would wipe out retail shareholders and wouldn't allow other funds to buy up the shares and sue. I'd be interested in all of us discussing Snarky's concern of a private settlement with plaintiffs only and leaving out retail investors. Here are some comments in the past about this topic: Liquidation preference at par value + legal provide the "margin of safety" here. Someone hinted at the fact that it's possible the plaintiffs in the major cases negotiate a settlement privately that could screw public shareholders - some on this board mentioned it's not possible but still not sure I can think of every potential scenario within this space. The citi bailout paid par to private preferred shareholders (I know this is different, Fairholme holds the same shares we do), but it just generally scares me a bit. Other than that, only a recap fully financed by only retained earnings seems to hurt the preferred holders (I own ~20% common as a backstop against this)

https://www.insidemortgagefinance.com/imfnews/1_1174/daily/nationstar-changes-name-to-mr-cooper-1000042572-1.html It’s anticipated that Treasury – at the very least – will contemplate settling with some of the GSE plaintiffs in the “takings” cases and solve the Fannie Mae/Freddie Mac “problem” administratively. As for the details… https://www.insidemortgagefinance.com/imfnews/1_1174/daily/gse-dividend-debate-over-what-to-do-continues-1000042564-1.html The issue of whether the Federal Housing Finance Agency will alter the dividend payments Fannie Mae and Freddie Mac pay the Treasury Department became a bit more complicated this month when agency Director Mel Watt hinted in correspondence he’s unlikely to make a change. ... Haynie added: “I think he will act this year – and he will change that dividend payment to annual from quarterly. Watt is adamant that they should not have zero capital.” In May, the regulator told the Senate Banking, Housing and Urban Affairs Committee he does not want to see the two with zero capital, suggesting a delay in the dividend payments, not an elimination of them.

How do you mean?

The ability to separate the reality of a situation against what a stock price says is the primary reason my net worth exceeded the million dollar mark in my early 30's. Avoid using the stock price as a proxy for value, avoid using price fluctuations as a gauge of what is good/bad news. This is a philosophy that people either live by or don't. One can't be a successful value investor (or special situation investor if you want to call it that) by only believing this philosophy half-way.

That sounds like a deal is in the works.

Spot on.

If they can't win any cases, then sure. But that's one heck of a strong statement. Remand on contractual claims isn't losing a case. Sweeney releasing documents isn't losing a case. And so on. I think it's a huge stretch to say with any certainty that they can't win any case. I understand that people are fatigued, and Berkowitz/Perry probably are to a certain degree as well, but to me at least that doesn't mean I start thinking it's impossible to win any court cases. With that said, the likelihood of winning a case might not even matter if the Administration simply wants to put these cases behind them. And with that said, I don't even think court cases are what will determine this... I'd be very surprised if court cases determined the outcome. I think this is more a bet on what one believes Mnuchin, Watt, Trump, etc. will do and I've seen enough, and continue to see more and more, that makes me think they'll do something favorable for the housing market, taxpayers, and shareholders (at least preferred). But that's just how I see it and I could be wrong.

Anything lower than 80% would be weak, not solid.

One can almost bet their life that lawsuits (Perry, Berkowitz, etc.) won't settle for anything less than 80% par at a bare minimum.

Just FYI, they would absolutely drop their suits if paid at par. There's no question about that in my mind.

http://www.dsnews.com/headline/08-09-2017/hud-enough-enough Carson added that by pursuing housing finance reform, the Trump administration seeks to “unwind the federal government’s role in the private mortgage market and ease the stress on rental markets.”

https://www.insidemortgagefinance.com/imfnews/1_1166/daily/-1000042411-1.html#Login August 10, 2017 FHFA Chief Concerned about GSE Zero Capital Buffer, but Doesn’t Want to Promote ‘Recap and Release’ By Paul Muolo, pmuolo@imfpubs.com Although Federal Housing Finance Agency Director Mel Watt is concerned about the GSE capital buffer falling to zero early next year, it appears he’s unlikely to take administration action anytime soon to fix the situation. At least that’s the message conveyed in a new letter Watt penned to National Association of Realtors President William Brown. According to the August 9 correspondence, Watt notes he’s “very concerned” about the issue because it “increases the probability of a draw which could cause an adverse market reaction.” But the regulator adds: “However, I am sensitive to the prospect that whatever steps FHFA could take might be misperceived as either an effort to promote recapitalization and release of the enterprises or as interference with Congress’ important work to advance housing finance [GSE] reform. Consequently, as I continue to urge members of Congress to tackle the difficult and complex issues of housing finance reform, I will continue to look for ways to ensure that the concerns I have expressed are addressed constructively.” In late June, Brown wrote to Watt, suggesting the FHFA establish administratively what NAR called a “mortgage market liquidity fund” where Fannie Mae/Freddie Mac profits could be set aside to cover future short-term losses. Alterations made to the preferred stock purchase agreements governing the conservatorships back in 2012 changed a quarterly GSE dividend payment to a sliding scale near-total profit sweep. The buffer of how much earnings Fannie and Freddie can keep falls to zero in 2018 from $600 million currently.

http://investorsunite.org/questions-answers-conservatorship-capital-framework/

https://www.insidemortgagefinance.com/imfnews/1_1164/daily/Fairholme-says-Trump-DOJ-Will-See-things-Its-Way-1000042396-1.html?ET=imfpubs:e9671:73599a:&st=email&s=imfnews Fairholme Predicts Trump’s DOJ Will See (GSE) Things Its Way By Paul Muolo, pmuolo@imfpubs.com Fairholme Capital Management, one of the largest speculators in GSE junior preferred stock, has a message for its investors: the Department of Justice in the Trump administration will see things its way and probably settle the “takings” cases. According to Fairholme’s new mid-year report, the recent release of documents in its GSE case against the government proves the DOJ in the Obama administration knew what its “statutory authorities were” and “willfully exceeded those authorities to steal billions of dollars from investors, and subsequently engaged in a cover-up to hide their wrongdoing.” Fairholme predicts the newly released documents will prod Trump’s DOJ to see that the legal actions taken by the Obama administration “undermine” the government’s case. Roughly five years ago, Treasury changed the quarterly dividend payment paid by the GSEs to a near-total sweep of their profits. As the owner of Fannie/Freddie senior preferred, Treasury receives quarterly payments. The owners of GSE junior preferred shares have received nothing since the government takeover in September 2008. Fairholme said it believes the two GSEs can “safely return” to the market as guarantors with private capital. “There is a proven blueprint to succeed, and we hope to successfully resolve this matter before reaching the Supreme Court of the United States,” the company told investors.

WSJ Fannie, Freddie Signal Possible Payment Delay as Debt Ceiling Looms by Andrew Ackerman https://www.wsj.com/articles/fannie-freddie-signal-possible-payment-delay-as-debt-ceiling-looms-1501795451

Fannie's plans for the retained capital if it is indeed retained... "To the extent that these quarterly dividends are not paid, they will accumulate and be added to the liquidation preference of the senior preferred stock. This would not affect the amount of available funding from Treasury under the senior preferred stock purchase agreement." Thoughts?

Congress wouldn’t do it, so Fannie and Freddie reformed themselves http://www.marketwatch.com/story/congress-wouldnt-do-it-so-fannie-and-freddie-reformed-themselves-2017-08-03?mod=mw_share_twitter

The Fannie Freddie Document Treasure Trove by Richard Epstein https://www.forbes.com/sites/richardepstein/2017/08/02/the-fannie-freddie-document-treasure-trove/#1491d8992905

Conservatorship Capital Framework (CCF). If I'm not mistaken, this hasn't been mentioned before...

Twitter comment from Light and response from Carney... Joe Light‏ Verified account @joelight 16m16 minutes ago Freddie says it plans $2 billion September dividend but language around payment has changed significantly, possibly anticipating a change John Carney‏ Verified account @carney 2m2 minutes ago Yep. Key phrase "if the conservator declares a senior preferred dividend equal to our dividend requirement." Big IF clause there.

See attached...

Tim Howard's latest... https://howardonmortgagefinance.com/2017/07/31/a-pattern-of-deception/

Not saying all these are related but they could be... Trump to decide on Obamacare payments this week. http://www.washingtonexaminer.com/kellyanne-conway-trump-will-decide-next-week-if-administration-will-make-obamacare-cost-sharing-payments/article/2630121 Mnuchin, Corker talk mid-May about decision in 75 days (would be August 1 or thereabouts). https://www.c-span.org/video/?c4676133/75-days-end-july-2017 Watt publicly speaking on August 1 in the evening. https://www.fhfa.gov/Media/Pages/Public-Engagements.aspx