investorG

imo we should all thank Mel Watt for his patience in 2017 -- a deal like this with Treasury on board is better than dancing alone.

congresspeople (r's especially) / Bloomberg / mba / banks / wsj / carney ---- all on the same team. I cant figure out if they truly want to see us in pain or just simply to help out their big bank donors and friends and don't care about us (even if we receive some shareholder rewards).

Thank you for posting this. Here are what I think are the most important points: The Fourth Quarter Dividend section says that the entire NWS dividend minus $2.4B will be paid on December 31. If Watt tries to hold back any money the capital reserve immediately falls to zero. The Increase in Liquidation Preference section says that Treasury's liquidation preference has increased by $3B for each company. My initial thoughts: Overall I don't think this is slam-dunk great news, or even very good news at that. Watt basically cannot choose to hold back capital from this point forward; if he does then the reserve amount drops to zero, making it extremely costly (an extra $3B per company added to Treasury's liquidation preference) to do so. The liquidation preference went up by $3B (per company) anyway. This is essentially a draw of $3B for each company, though that section may have only been included so that Treasury "gets something out of the deal." The NWS continues. The only possible positive spin here is that the only purpose of this agreement was to get it in ahead of any HR 4560/Jumpstart language that could be included in an end-of-year spending bill. HR 4560 states that any agreements made between FHFA and Treasury after January 1, 2018 could not change NWS-type language established before that date, so Treasury and FHFA had to act quickly. The language in FHFA's statement is interesting. The words "contemplate" and "exigent circumstances" leave a lot of wiggle room, even though the letters themselves don't seem to. I think 'contemplate' is a good word for us. and the fact that it's a joint agreement with Tsy on board. I also guess that your concerns on watt withholding future dividends isn't too big of a deal because watt's made it clear he's not going to recapitalize the companies on his own. all the signs point to a real effort to get something done in 1h 2018, and this does not get in that way. i'm most concerned with re-jumpstart sneaking in these last few days and mnuchin losing negotiating leverage (assuming he's a balanced actor, which we don't completely know yet).

good news but no celebrating yet, imo --- they could still pass re-jumpstart without the housing trust fund withholding addition (now that watt has front-run that).

nice post. imo the implied guarantee is almost certainly a thing of the past. and reinstating dividends is possible but seems counter-productive relative to goals of making them well capitalized. it's hard to tell whether the market is pricing FNMAS and FNMAT higher than others due to liquidity or dividend potential, perhaps both.

maximizing warrants does not seem to be a priority for any congressperson or senator, even if it is for some people on the message boards and moelis / ackman / rnc. I used to believe it made sense to believe in the warrants' appeal but no one in power has spoken up, despite many opportunities to do so.

Agreed. The biggest risk of zero, imo, was Congress eliminating the companies and giving shareholders the middle finger by keeping the SPS on the balance sheet. It is much harder to screw shareholders when the companies themselves are preserved, and there is less incentive to do so. Agree, is now the time to go all in if you haven't already? imo there's never a good time to go 'all in' until it's too late to do so.

FWIW no mention of them getting rid of fannie and freddie. Keeping them owned by gov not a great mention. Goes totally against Mnuchins out of govt control and ownership. Hensarlings bill looks like posturing and a smoke show. Put up a big stand, preserve your legacy, yada yada. The Corker Warner bill seems to be the more realistic attempt to actually move forward in some fashion. I suspect you may be disappointed. if we put ourselves in mnuchin's shoes, what's the upside for aggressive administrative action early on? I don't see much. rather, the best we can hope for imo is that mnuchin engages with congress in a balanced manner that supports all constituencies, including ours. and also can ask santa for a 4th amendment in 1q 2018 if for some unlikely chance re-jumpstart fails.

that information could be stale, but most likely the 44mm shares is a subset of the 115mm; 44mm owned in the long term publicly traded investment vehicle and the rest in his traditional private hedge fund.

given the status quo seems dead, it appears there's just 2 options, if FnF survive as we hope: utility with regulated rates of return or added competition? there seems to be reasonable merits and drawbacks for each idea.

interesting. the market is in 'show-me' mode. FnF investors used up their 9 lives of hope a long time ago. This is in reference to the Hensarling bill correct? Not the Corker/Warner bill that was reported to be friendly to preferred. Hensarling said in his release he wanted the charters repealed. the current charters probably will be repealed -- ie the implicit guarantee model is almost certainly dead. hopefully the companies continue and thrive in a new form!

it's unfortunate that re-jumpstart is happening but it is what it is. mnuchin however likely still has some power unless they get 2/3 majority to over-ride any veto on housing reform. and with the congress having a good chance to flip in 2019, if trump/mnuchin are still around, they can tell Pelosi and Maxine waters to hold off on any legislation until early 2019 when they'd get more of what they want. so hopefully, this is why everyone would come together in 2018 and get a bill done that is balanced and gives each side a little of what they want. the bank lobby and republicans probably want it to get done this time.

interesting. the market is in 'show-me' mode. FnF investors used up their 9 lives of hope a long time ago.

time will tell whether joe's reporting was accurate or fake but it appears the market is isn't buying its accuracy with the illiquid preferreds still close to 20pct of par.

thanks, Emily. I agree with your level of suspicion regarding this bill. the joe light article could have been a decoy. the Congress is running for re-election before trump. if mnuchin supports this bill, well then that's that. if he does not because he'll tie his own hands, then we'll have to see if either a) congress can get a veto proof majority on the matter or b) the congressional Repubs want to fight on this by holding up taxes or the short term spending bills.

hmmm. lots to think about here. especially since we don't know what mnuchin wants. on one hand, he thinks extending jumpstart for a year is fine since he really does want to work with congress and avoid friction with the Republicans. on the other hand, he could recoil from this, realizing he loses leverage in negotiations in 2018, and play chicken with Congress if they resist completing the govt funding or tax reform over this. he might also want to settle lawsuits with a 4th amendment, and this could scuttle that plan. there's not a lot of volume in the lower price preferreds which tells me that the mkt doesn't fully buy this joe light article. Lets see what the end of the day volume is on the preferred. Put in an order for the less liquid preferred and extremely hard to come by. Who would be selling with this news at these prices? I try to think at things from multiple angles. what if the joe light article was simply a way to grease through the jumpstart extension, and ultimately means little? or what if the corker plan pays back preferreds but only over many years, which reduces the NPV? I wouldn't be writing this if conveniently the jumpstart renewal didn't appear 12 hours after the Bloomberg article. Did you even read that bill that was posted? It appears as an extension of 1 year BUT it actually tries to stop paying out money for the housing trust funds while assuming dividends will stop as well. What this bill (Corker/Warner) is trying to achieve is prevent Admin to nuke the Srs. because... my view, they want to do that in the housing reform bill and this little bill is a prelude to allow recapitalization and build up of capital. The original jumpstart was two lines. It only referred to tying up Treasury's hands. Had no language on anything else. This is much more than just an extension. It is already meddling with potentially a 4th amendment that will stop dividends. There are still funds/retail that use any rally to unload. A bit disheartening. @ Orthopa that wayne comment wasn't nice. And we still don't know the end to this movie. My view why Mnuchin is implicitly okeing all this. He said any reform comes after build up of capital. The above bill appears to: a) give congress 1 more year for reform b) strongly suggests fixing the coming zero net worth capital as it includes language of "not paying dividends". we're not seeing this the same. do you think mel watt is eager to stop funds to affordable housing if he withholds sweep dividends? I don't. I see this as an attempt to thwart any 4th amendment and continue the sweep until Congress acts, if they do.

hmmm. lots to think about here. especially since we don't know what mnuchin wants. on one hand, he thinks extending jumpstart for a year is fine since he really does want to work with congress and avoid friction with the Republicans. on the other hand, he could recoil from this, realizing he loses leverage in negotiations in 2018, and play chicken with Congress if they resist completing the govt funding or tax reform over this. he might also want to settle lawsuits with a 4th amendment, and this could scuttle that plan. there's not a lot of volume in the lower price preferreds which tells me that the mkt doesn't fully buy this joe light article. Lets see what the end of the day volume is on the preferred. Put in an order for the less liquid preferred and extremely hard to come by. Who would be selling with this news at these prices? I try to think at things from multiple angles. what if the joe light article was simply a way to grease through the jumpstart extension, and ultimately means little? or what if the corker plan pays back preferreds but only over many years, which reduces the NPV? I wouldn't be writing this if conveniently the jumpstart renewal didn't appear 12 hours after the Bloomberg article.

hmmm. lots to think about here. especially since we don't know what mnuchin wants. on one hand, he thinks extending jumpstart for a year is fine since he really does want to work with congress and avoid friction with the Republicans. on the other hand, he could recoil from this, realizing he loses leverage in negotiations in 2018, and play chicken with Congress if they resist completing the govt funding or tax reform over this. he might also want to settle lawsuits with a 4th amendment, and this could scuttle that plan. there's not a lot of volume in the lower price preferreds which tells me that the mkt doesn't fully buy this joe light article.

it's likely one of the reasons we're at these low levels, his views that we found out today have likely been distributed to industry players in recent weeks The bolded part isn't right. We have known that Hensarling wants to kill the GSEs and get the government completely out of housing finance for a long time. I think this is why the market had little to no reaction: it isn't news. https://hensarling.house.gov/media-center/press-releases/hensarling-re-introduces-legislation-to-end-taxpayer-funded-bailout-of I don't see it the same way, after reading the text of his speech. he admitted the Path act and no govt guarantee are not viable even though he still supports them. this is new. but he reiterated a wind-down of FnF which means even though he's adapted his views, this core element remains unchanged. as discussed prior, mnuchin is the wild card. but with such a line-in-the-sand wording, it tells me it's unlikely that gse-investor-friendly legislation passes congress in 2018. so we're left with 3 options: wait for 2019 (with maybe democrats in charge), something legislatively in 2018 that isn't great for us, or something purely administrative.

Keep in mind the warrants that the gov't owns. They would give up a few billion per quarter by stopping the NWS but would gain a massive amount of cash ($100B+?) almost immediately by the common stock rising and the warrants being sold/exercised/etc. With a maximum 7-year window for this Administration, perhaps 3-year window, I'd rather have a massive payment up front to use at my disposal. while it's surprising to me, no congressperson has mentioned the warrants to my knowledge. Thus, I don't think the warrants are driving the process; I doubt Mnuchin would get up and say we need to structure reform in X way to make sure we monetize the warrants. Rather, they seem like a secondary added benefit of any plan that preserves FnF.

it's likely one of the reasons we're at these low levels, his views that we found out today have likely been distributed to industry players in recent weeks

it's bullish because it means HFSC will get nothing done while he is chair or has any influence the House Repubs could latch onto ginnie mae model. this is where mnuchin's thoughts should come in, whenever he tells us what his goals are. to be clear, if hensarling hates FnF, he hates GNMA even more. he wants govt out of housing. I encourage everyone to read the text of hensarling's speech today, simply google house financial services committee, it's on the front page. it's not encouraging. he acknowledges some things he wants but won't get, yet his solutions are not what many on here prefer. Hopefully, Mnuchin fights for a different outcome. In the end, though, I still think even if FnF are wound down, there are ways to treat public shareholders fairly (given the small market cap), and thus I still believe in the value of the securities at these levels.

it's bullish because it means HFSC will get nothing done while he is chair or has any influence the House Repubs could latch onto ginnie mae model. this is where mnuchin's thoughts should come in, whenever he tells us what his goals are.

all of this is like having a board meeting before a newly-installed chairman comes into the room -- while the discussion is interesting, it's merely the prelude. imo the stopwatch starts whenever tax reform is completed (or fails) and mnuchin / phillips address the elephant in 1h 2018. mnuchin has already said, recently, he doesn't support shutting down FnF (and phillips mentioned getting them out of conservatorship eventually) -- so we all want to know what does mnuchin want and also is he going to take the lead or follow congress. in the mean time, we're adrift with buyers sucked in only when prices decline.

What Chris said. That language would be a really arcane way of dealing with such a simple problem. Looks like this is the final bill voted on this morning around 2am: https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rXqXuQfYbRas/v0 A search for the words above including DTA yields nothing. There is, however, language for net operating losses carryovers (nols) but this is expected in a tax bill. I would have expected that nols related to the GSEs would have been addressed individually and separately, like nols of insurance companies in this bill. But no reference to Fannie/Freddie/FHFA. I hope I am right. With Corker now a pariah and an invisible Senator for the rest of his term, should we get excited about Monday's opening? The window of oppo for Corker to do anything prior to sending the final bill to Trump seems now non-existent. Just as supporting any of his reform plans. Will he and Warner get railroaded? What else is to fear? SCOTUS not taking our cases? A grenade coming out of left field by Gary Cohn, although he also seems on the way out? nope