goblue100

Thanks for the replies on preferred class preferences. Not sure if group has seen this commentary from KBW, but comments like these have been bandied about the past few days. I assume this would have no impact on value of preferreds but would appreciate thoughts on recapitalization and impact on value of common, etc. BFW) CORRECT: FNMA, FMCC Shares Zero Value Most Likely Scenario : KBW +------------------------------------------------------------------------------+ CORRECT: FNMA, FMCC Shares Zero Value Most Likely Scenario: KBW 2016-12-02 14:04:16.476 GMT By Felice Maranz (Bloomberg) -- (Corrects headline to reflect value of shares rather than actual price of shares) Even in "best case scenario" of Fannie, Freddie privatization with 2.5% capital requirement, capital need would "meaningfully" dilute common shares’ value, suggesting little upside from current levels, KBW’s Bose George writes in note. * Still believes most likely scenario is one in which common shares have no value * Notes FNMA, FMCC rallied on Steven Mnuchin comments about new administration wanting to get GSEs out of government hands; resolving GSE issue was top 10 priority for new administration; but KBW believes share movement has been based on "unrealistic" earnings expectations as there hasn’t been enough focus on lack of capital ** Even if GSE litigation were successful and Trump White House decides to let FNMA, FMCC go back to prior business model, with 2.5% capital, shares already trading at ~10x pro forma earnings ** Under best case, assuming 2.5% capital requirement, FNMA would need >$75b, FMCC would need >$50b; if this were to be raised at ~$5 a share, share count at both would grow by ~4x; est. fair value would then be ~$4 (current level); if capital level were set at 5%, fair value would fall into $2.50 range ** Also notes if third amendment to the GSEs’ senior preferred stock purchase agreements were overturned, GSEs could replace sweep with periodic commitment fee (meant to compensate Treasury for ongoing commitment via $400b credit line)

For the experts on the preferreds, do you recommend a specific series b c of discount to par or certain advantages? I own FNMAS (due to its trading liquidity) but would appreciate thoughts on the other issues. Thanks for such an extensive dialog.