orthopa

I still hold a large fannie position. All preferred. I would stay away from common. As much as this investment has been based on the kindness of others to work out in the end alot more kindness needs to be given to common then preferred. Govt Senior Preferred Shares and Warrants will dilute common. 99.9 of new common will likely be gov's but ultimately priced by market. In Calabria's recent book he discussed treasury was ok with their SPS shares and Junior preferred converting to common in new co at same haircut if any. Any "haircut" will be priced by market with new equity on convertion. Preferred being redeemed at Par not unrealistic. Small hair cut possible. That gives FNMAS 6x is here. No way common is worth $8+ a share after dilution behind SPS, warrants (not to mention liquidation preference that continues to build but most likely a give back of gov. Run the numbers, stay away from common.

Im still here following along. Not much to comment on at this time other then the upcoming trial. Good news: 1. Trial moving forward. Looks like it may get pushed back from Oct 17 date as pre trial hearing not done and jury not selected yet. 2. Lamberths SJ opinion will be totally unsealed and hopefully out monday. 3. Key in SJ will be what determination of damages he will let through or will be recognized. Rumor is Yellen and Deese maybe out after midterms. Big names in the trade but nothing seems to be happening administratively so probably a nothing burger.

Certainly hard to say. Thats the most positive headline that could have come out of that fireside chat. I think everyone in the FHFA, and Treasury understand what needs to be done. Its how to do it and when that continue to plague the issue. In my mind a couple catalysts that could move us forward. 1. Lamberth not granting summary judgement. 2. Lamberth going to trial and all the protected documents coming to light 3. Democrats mid term shellacking and a move to monetize the govts stake for affordable housing before a new president (trump) gets in. 4. Longer term 2024 and after if Trump is re elected in light of letter etc.

None that I am aware. A part of me asks how part of the PSPA can be ignored but the verbage leaves open missing the deadline thanks to the word "endeavor". I expect this to be missed and a permanent FHFA director to be named after the debt ceiling, infrastructure bill fiasco is voted on or more finalized. A part of me thinks that the whole Calhoun rumor was just that but Maxine acting out makes me think otherwise.

FHFA changing aspects of the capital rule already. https://www.fhfa.gov/SupervisionRegulation/Rules/Pages/Amendments-to-the-Enterprise-Regulatory-Capital-Framework-Rule-–-Prescribed-Leverage-Buffer-Amount-and-Credit-Risk-Transfer.aspx Whoever/whatever is behind this doesnt seem to be waiting for whatever reason. Nothing of substance yet for shareholders but interesting to watch. They do discussed transferring risk to private capital though which of course implies a capital raise and thereby not a large dominating treasury stake.

with dem controlled congress, kamala harris the tie breaking vote and an affordable housing bent how can he not?

And so it begins. I think Calhoun is very bullish for shares at these prices over the next 12 months. Im going to add to my position heavily at these prices. 12 months from now I can see the preferred trading much higher then $.07 on the dollar

According to inside mortgage finance multiple sources put Calhoun as the next FHFA chief with an announcement this week. Apparently CRL has accepted funds from "controversial sources, including John Paulson." Here we go again

If confirmed certainly bullish for shares. Will need to repurpose the capital rule again and of course amend the PSPA. His paper lays out a pretty good explanation of why the GSEs should be released and what the give back for the gov stake should be and why it should happen. The PSPA will of course be all important and he will need to navigate all the lobbyists looking to secure their piece of the pie. Of all the possible candidates that have been mentioned Calhoun is certainly the best for shareholders. A stumbling block to the release has always been the "political cover". Setting up a housing fund with the gov stake is pretty good cover. Who is going to argue against help for housing for those that cant afford it? The risks of that are a different discussion. With a utility model the capital requirements will be lower but still how much dilution in this scenario for common still unknown. I still like the preferred here vs common even with a faster recap. With the common trading just below some preferred I think the common getting to $25 is a bit of a stretch and I still like being higher in the capital structure after getting slammed.

I havent finished listening but the flip side to this was the SCOTUS seemed like things were going to go very well based on the arguments and how harsh the justices were there and not one justice sided with us so there is that too. Whats more disheartening more then anything was that it took over 18 months from the time of sweenys ruling to oral argument on appeal. Its at least 3 years before we get anywhere near a final ruling in that court. Lamberth closer and we know for a fact that the evidence there will finally be presented.

Ed Demarco is coming around finally https://www.washingtonpost.com/opinions/letters-to-the-editor/free-fannie--and-freddie-too/2021/07/16/2651cf58-e4d9-11eb-88c5-4fd6382c47cb_story.html

preferred as I do not see a scenario where common get more then $25 a share by the the time this is all done and over with. The market is essentially pricing the two the same implying in the end the value of both is very close by assuming the companies only recap by means of retained earnings and there is little common share dilution. I disagree with this although I wouldn't call someone who believed otherwise foolish. Also the way things have been going I continue to like a higher place in the capital structure. My assumption is divs are never turned back on and preferred is converted to common.

I don't know if I agree with that. How can the govt take without compensation? The NWS took property without any additional investment in the GSEs. Gov could have rightly taken the NWS if say more support was given in exchange. Nothing was given. The reason then given was a lie which the court cases will show. Reading lamberths last opinion gives a good look into what areas and questions the plantiffs raise regarding fair dealing, contract right etc. Im not a lawyer and will defer from a strong opinion due to holding the position but Im not sure how an impartial person can look though the evidence and not find the gov lied and blatantly expressed the desire to wind down and get rid of FnF. Does it matter? It remains to be seen. Assuming the court cases go no where the gov still has to either wind them down or has the option to maintain the status quo until either a housing market/stock market crash or the companies recap themselves over time. Anyones guess as to what happens. There is nearly a 1 year quiet period until lamberth trial, no apparent rush to nominate a new FHFA director and the Biden admin has been mum on any comment regarding FnF...thus we are at $.06 on the dollar. That being said since I was not in the trade when these prices were last seen I have been nibbling. At some point in the next couple of years I think the shares are up at a multiple of $.06. This is surely max pessimism since I have been in the trade and it was always the wrong time to buy during max optimism. Question is, is this time different?

Im no lawyer so Im happy to have other opinions but the most recent SCOTUS was a statutory ruling. They plainly interpreted HERA. Lamberth agreed already that the APA avenue was a no go but other claims are proceeding. Can SCOTUS rule HERA says FHFA can do what is best for itself but not honor a contract? Can FHFA do what it wants but still have to pay for property taken? I guess we will see if we get that far.

I agree that is a similar worst case scenario. The money is not going directly to treasury via cash but do they or anyone else care? They will have to ultimately to get over the inertia. Although not 0 certainly why market pricing in close to it at $.06 on the dollar as well as uncertainty regarding new director. FWIW when pessimism on this investment has been highest the returns have been the highest too. Every time things became very promising was the wrong time to buy.