DRValue

can someone post tweet text So Fannie, Freddie will have: 1. No QM advantage 2. No explicit guarantee 3. Bank-like capital reqs 4. No securitization infrastructure advantage 5. Uncertain outlook for future legislation or competitors 2020 IPO roadshow here we come? 2 is no issue to me. 3 wont happen, if it does RoE will be utility like so abbsolute return will still be $11-$12b per year. 5 has always been the case.

Dead money until redeemed or Divs turned on. Uncertainty still too high until its official to justify CAGR to Par.

I can't see calabria confusing his dates in 2 interviews so close together. Way I see it is the recap process takes 2+ years but formalised much sooner. The caveat to that is I see an instant recap as easier given the looming uncertainty with congress. Doing the recap without a capital raise would allow congress to do whatever it wants whenever it wants to. That would leave the stock price depressed until congress formally backs off.

https://twitter.com/joelight/status/1126175599507202049 Interests me that calabria says at least a session of congress. So assuming that means 3 years Fannie Maes capital might look like; 3 years net earnings of $33b. $20b overpaid to nws refunded or tax credit (counting as capital for now...) Assuming capital required is $87b that would mean a capital raise of "only" $34b. With the warrants exercised that leaves c.6.5b shares outstanding. Using a market cap of $165b (p/e of 15), raising $34b at $17 leaves 8.5b outstanding and a share price of $19.41. Commons looking even more interesting. Thoughts?

wasn't following this case. 5th circuit in Collins won't be affected by what 9th circuit says re CFPB. the 5th cir also has a cfpb case, all American that has had oral argument. seems to me they will decide collins first Phew! Always great to be able to rely on Chris. I don't know why it's not affected but it doesn't matter as I trust the answer! :) Legal opinion for those interested. http://cdn.ca9.uscourts.gov/datastore/opinions/2019/05/06/17-56324.pdf

wasn't following this case. 5th circuit in Collins won't be affected by what 9th circuit says re CFPB. the 5th cir also has a cfpb case, all American that has had oral argument. seems to me they will decide collins first Phew! Always great to be able to rely on Chris. I don't know why it's not affected but it doesn't matter as I trust the answer! :)

CFPB constitutional again! :) https://news.bloomberglaw.com/us-law-week/cfpb-structure-is-constitutional-ninth-circuit-says Summoning Chris...

Thinking about another proposal for instant gse recap... If the spsa isn't deemed repaid as per Cowen note and we ignore lawsuits. One option might be for the treasury to keep the spsa 10pct moment dividends and transfer the remaining 119b principal (for Fannie Mae) to Fannie Mae then convert the spsa to common. Interestingly that would leave them over capitalised by $32b (119-87) which could either be used to redeem the juniors and/or back pay dividends which I personally think they are owed. Imo this would wipe the slate clean on potential lawsuits and be politically acceptable. There would also be extra warrant money. What this does to the share count for common I don't know...

the frigging last thing you want before a large capital raise is to have a decision maker spouting off. I will say however that Bethany will be great as a questioner. Bethany is fantastic.

my best guess is that if there were a 4th amendment that recharacterized prior "excess of 10% dividends" into pref reductions then the pref balance will be reduced to zero. no hit. what that does to prior years' accounting I know not So looks like I'm in the minority. My thinking is shaped by the "let the gse's pay us back act" bill that was proposed where the interest rate was amended to 5pct. It didn't go anywhere but tells me it's possible. It'd be quicker and give investors more confidence. I can't help but think a capital raise is going to take a long time. Ah yes you're right there is no chance of this, unless changing the 10pct agreement to 5pct is actually possible. I was confusing the nws with the 10pct original agreement. There isn't a legal argument against the original 10pct "agreement" so apologies.

my best guess is that if there were a 4th amendment that recharacterized prior "excess of 10% dividends" into pref reductions then the pref balance will be reduced to zero. no hit. what that does to prior years' accounting I know not So looks like I'm in the minority. My thinking is shaped by the "let the gse's pay us back act" bill that was proposed where the interest rate was amended to 5pct. It didn't go anywhere but tells me it's possible. It'd be quicker and give investors more confidence. I can't help but think a capital raise is going to take a long time.

I've said for a while that I feel like there is a reasonable chance that the spsa is amended to a lower interest rate. Does anyone else think that's a possibility? Probability? Imo it's clearly the easiest fastest way to largely recap the companies and the warrants can still net the government more money. Also on lawsuits amending the nws as above may leave money to pay junior prefs dividends they should be owed. But the junior dividend suits may well have been decided and/or hit statute of limitations.

I feel like if the US government really wanted to get this done over 10 years they would've done. I won't speculate why it didn't get done. Knowing how congress need to rely on the experts to make recommendations, I suspect that treasury will say "this is what reform looks like, do you want it?". I can't see them debating it further when a recap and release formally closes the issue. I can't see congress keeping going with no justification.

It's just occurred to me that Mnuchin wants housing finance reform done in 6 months and Calabria says the spsa will change September / October. Seems to me Mnuchin is getting investor uncertainty out of the way before the capital raise, so all good. I don't think congress will continue to meddle because in the past they have said they want treasury to tell them what to do.

I own mainly fnmaj. They've always generally been cheaper.

I think it will reduce objections Sustained. I thought I was the only funnyman here. I thought there were no funnymen here Move to strike

No question, 180 Billion of creative financing he says. Wouldnt it help to allow them to start to keep some of the 20B a year that they make? ::) ::)Also makes mention of people needing to trust and not be afraid of the GSEs. Not mentioned directly but people need to not be afraid of investing/putting capital in them too. The plan has been outlined for us. Now we just wait and ponder if we have enough in the investment. Creative financing. I wouldn't be surprised to see a fourth amendment refund some of the nws monies you know.

wow this is thorough and professional. and fairly direct. one question - does the use of the words 'successor entities' on page 4 bother any of you? does this mean receivership is actually still an option? As it mentions gse's in the same sentence I convinced myself it was referring to additional guarantors. But I'm still nervous! I don't think it's referring to other guarantors. hopefully by using those words it means if their charters are changed in the legislative route. it's never easy...interested in others' views on this? I've re-read this and agree with you. A couple of observations; It gives flexibility to leave the gse's as is or change them. I didn't get the impression in all the other text that there was the potential for successors, in terms of receivership. It could mean breaking them up, or combining them.

wow this is thorough and professional. and fairly direct. one question - does the use of the words 'successor entities' on page 4 bother any of you? does this mean receivership is actually still an option? As it mentions gse's in the same sentence I convinced myself it was referring to additional guarantors. But I'm still nervous!

Finally some concrete signs of intention! Although they still haven't said exactly what they will do this is better than nothing. I don't like the talk of competition and I don't read it as applying broadly to the private sector, more so to the gse's. Then again you can't raise capital without a clear picture of competition so it may not be too bad. I wouldn't be surprised if the nws doesn't happen now. I don't see how it could affect calabria as it can be seen as coming from treasury and also he's got the party line vote. The timing of this memo is also curious in respect of the nws date.

Smart money says 50/50.

I like the fact the nws this quarter is on a Sunday. just saying... ;)

I found the fox news video funny. Exasparino basically says "recap and release, don't buy the stock. He'll recap them we don't know when. DON'T BUY THE STOCK" Absolutely a gatekeeper to riches...

Any thoughts on what approval from congress looks like? Surely they can only implicitly approve it by not explicitly denying it?

Still waiting on Senate confirmation. Not too confident on Collins since the defendants cited a recent case where being unconstitutional didn't erase actions. Not sure about the electron year but calabria being independent and some fight back from the administration could make it doable imo. I know lawsuits take a long time but any reason Lambeth is that far out? Also Sweeney has been quiet for a while, that must be getting close to longest case records...