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beaufort

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    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    Ackman talked about Corker and Warner again.  He talked about how he has been in touch with them and they will be leading the effort of what is likely to happen.  Ackman says Warner and Corker are sophisticated.  I think Ackman chooses his words carefully and in a calculating manner.  I realise I am not saying anything new here.  Ackman chose to repeat himself and to point out that the stock price, presumably the common, trades like an option.   

     

    I have been buying preferreds lately.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    With the coming blow out quarter as a result of the RBS settlement (according to IMF news), my memory is the full amount borrowed from Tsy with the 10% coupon will have been paid off entirely.  When that happens, there is no justification for the NWS. 

     

    I could see the NWS ending by agreement between Tsy and FHFA after full payment has been made, even if both FnF are both left in conservatorship moving forward while waiting on legislative reform.  While there are elements of a recap, it is not release because there is no release.

     

    Watt has said he believes that it is the legislature's job to enact housing reform.  That doesn't mean the NWS has to keep going on after all debts have been paid.  I don't remember what he has said about ending conservatorship.   

     

     

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    I was thinking the same thing as Snarky re administrative reform.  Given the legislative sets backs thus far for the Trump administration, there is an argument to be made that administrative reform is the prudent way forward - in Jan 2018. 

     

    If the legislature wants to act, there is as much time as legislators wish to devote to the problem moving forward.

     

    Though I am disappointed, I see how maintaining pressure on FHFA and Tsy with dwindling capital levels could prompt more favourable, further action.

     

     

     

     

     

     

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    I have had a few days to think about this week's events regarding both the RNC statement and the letter to Mnuchin and Watt from the 6 democratic senators and Mnuchin's comments at the politico event. 

     

    Mnuchin is an administrator who has had a consistent approach from the beginning.  It is appropriate that he requires the dividend to be paid until such time as a plan is decided on that resolves the current situation.  As other posters have commented on, it is also not Mnuchin's decision on whether the dividend is declared.

     

    There is nothing I don't like about this week.  The narrative concerning FnF is changing (failed business model, cause of 08 crisis).  A bipartisan effort looks like a possibility.  The timeline set out in the Moelis blueprint can remain on track. 

     

     

     

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    From today's IMF news:

     

    "Meanwhile, on Friday morning Cowen & Co. released a report saying one factor driving a GSE bill is the fear that the Treasury Department and Watt will use the receivership authority under the Housing and Economic Recovery Act of 2008 to administratively reform the system. Cowen analyst Jaret Seiberg writes that the FHFA could terminate the existing enterprises and turn their charters over to new entities"

     

    I wonder what this solution might look like.  It sounds like it may provide for a way to get around a Jumpstart GSE like stall.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    IMF news:

     

    The Federal Housing Finance Agency announced a $5.50 billion settlement with the Royal Bank of Scotland on Wednesday. The settlement stemmed from a 2011 lawsuit over non-agency mortgage-backed securities that Fannie Mae and Freddie Mac purchased from RBS leading up to the housing crisis.

    Under the terms of the settlement, RBS will pay approximately $4.53 billion to Freddie and approximately $975 million to Fannie.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    My memory is that Freddie has already over paid in relation to the original terms.

     

    @cherzeca, others, can you post a good source for how much is outstanding to Tsy by Fannie?  I did a (quick) search in the latest Q and didn't see it.

     

    After FnF have paid back all money under the original terms, there will be further impetus for the the widely accepted narrative that FnF are wards of the State to change.  Of course, nothing will dissuade Corker and his allies:  whose bread I eat, his song I sing.  Nothing will stop the singing until the bread stops being passed around.

     

    Importantly, the story is incrementally changing, from my biased point of view (I hold prefs).  There are more FnF positive stories all of the time and this has been the case since the election:  ICBA, Moelis, Mnuchin testimony and interviews, Watt testimony, Maria Baritimoro etc.   

     

    The more often that a positive narrative begins to get into the media, the better, as the political facts are being marshalled in real time in the form of stories.  There is a powerful sense of reconciliation when a troubled person/institution, or perceived to be troubled, finds his way and makes amends for past actions.  We can disagree with the assertion that FnF are responsible for the 2008 financial panic.  We are stuck with that story.  But we are making good headway with reform.  And completed reform leads to release such as that proposed by Moelis. 

     

     

     

     

     

     

     

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    "quite true, which is why MBA wants GSEs in receivership. but the senate banking committee has had years to do MBA's bidding to no avail. so maybe MBA needs to reset its objectives"

     

    The fixes discussed here are what might be called a 'reasonable' gesture towards the MBA and its masters.

     

    I have been thinking about the following point.  If you are Mnuchin and Watt, why are you going to be reasonable when you can have administrative reform? 

     

    I am not trying to be difficult.  Mnuchin and Watt have spent their lives building their reputations.  Do they want to be stuck with a result that potentially impairs their professional reputations moving forward for nothing?

     

    The administrative reform train is leaving.  That is a point that the MBA, Corker et al have to adjust to. 

     

    As Mnuchin has said, for years FnF have worked well.  They accomplish significant social good.  They facilitate the upward mobilization of the lower and middle income households.  Why blow it?

     

    Edit:

     

    I also accept cherzeca your point that there are many ways to skin a cat (made on Howard blog).  If the skinning can be done with FnF largely as is, I can see administrative reform incorporating it.

     

     

     

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    It seems to me that the Sweeney court of federal claims is the most straight forward action set to proceed.  Perry helps Sweeney in some respects.  Once the business of clarifying that contractual rights are transferable is sorted out, the Sweeney is ready to go.  The documents are being produced in her court.  What is the timeline for the trial in Sweeney?  I am assuming a summary trial for that as well. 

     

    A win with Sweeney gets everybody to the settlement table in my view.  I suppose that is true of any of the cases, but I want to emphasize that a win for the prefs also get the common to the settlement table as well.  If we lose with Sweeney, look out below.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    From BB's Jan 31, 2017 lettter:

     

    "We are frequently asked (i) why we own the preferred stock of Fannie Mae and Freddie Mac instead of common shares, and (ii) how this story ends. Our answers are simple: the provisions of the preferred stock contracts that we own provide us with greater security and certainty than the common stock and, as you know, we are not speculators. In this instance, we have invested in two superb insurance companies with unparalleled brand recognition, talented human capital, proprietary information technology infrastructure, and robust industry relationships. Fannie Mae and Freddie Mac are quintessential examples of what Warren Buffett (Trades, Portfolio) would describe as “economic castles protected by unbreachable moats.” As interest rates rise, Fannie Mae’s and Freddie Mac’s portfolios become even more valuable – and we anticipate that Q4 2016 results will reflect this positive impact. Allow me to emphasize a few points that you may have heard before:

     

    Any intellectually honest observer would proffer that the rational steps for resolution are: (i) halt the payment of any further monies to the United States Treasury; (ii) permit the companies to retain capital in order to protect taxpayers; (iii) transform the companies into low-risk, public utilities with regulated rates of return, just like your local electric company; and (iv) eventually release them from the shackles of a perpetual conservatorship so they can help more low- and moderate-income families move up the economic ladder."

     

    I would say we are well on our way to both (i) and (ii).  (iii) happens in second half 2017.  (iv) happens after Jan 2018, following the disposition of the senior preferred stake.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    My guess is that Berkowitz is a happy man (Sears aside).

     

    He has said in his interviews that he views things simply.  He likes to 'count the cash'.  Pretty soon, there will be more cash to count on the GSEs balance sheet.  It's that simple as a first step.  Cash that covers the junior pref liquidation preference (assuming senior prefs are agreed by Treasury to have been made whole) and any accounting earnings volatility.  Cash that also contributes to the long term viability of the GSEs, which is good for the common.

     

     

     

     

     

     

     

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