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

[sleepydragon]

Trump just posted this.. Nov 2025

 

[Sweet]

11 hours ago, sleepydragon said:

Trump just posted this.. Nov 2025

 

kinda bullish.  

[jdw230]

3 hours ago, Sweet said:

kinda bullish.  

Agreed

[sleepydragon]

Tempted to buy commons. Maybe it’s a mistake i sold all my commons… what ya guys think?

[COBFInfinity]

4 hours ago, Sweet said:

kinda bullish.  

It does appear bullish, except I have no idea what it means. Do you?

[Sweet]

3 hours ago, COBFInfinity said:

It does appear bullish, except I have no idea what it means. Do you?

It looks to me like a hint of IPO’ing the GSE’s in November 2025.

[COBFInfinity]

1 hour ago, Sweet said:

It looks to me like a hint of IPO’ing the GSE’s in November 2025.

What is the Great American Mortgage Corporation?

[sleepydragon]

1 minute ago, COBFInfinity said:

What is the Great American Mortgage Corporation?

The combination of fannie mae and Freddie mac

[gfp]

4 minutes ago, sleepydragon said:

The combination of fannie mae and Freddie mac

 

What are the odds that Freddie and Fannie can be merged and IPOed by November 2025?  I'm going to go out on a limb and say there is near zero chance they can even be merged by then.

[COBFInfinity]

6 minutes ago, sleepydragon said:

The combination of fannie mae and Freddie mac

Ok, what does that mean? There is absolutely no chance these companies merge before November.

[Sweet]

1 hour ago, sleepydragon said:

The combination of fannie mae and Freddie mac

Fannie, Freddie, both… renamed and repackaged?  I don’t know.  What else might it be?

[DocSnowball]

A note of gratitude to the forum and the posters over the years. Thank you thank you thank you!!

 

Have held preferred (FNMAT) in varying quantities since 2016.  Not a ten bagger yet but 8x (with trading here and there) - made up for a couple of failures elsewhere over the years. Sold 80% of my position a few weeks ago, holding just enough to sleep soundly at night. 

 

The folks in power (Treasury et al) don't seem to be trustworthy by any stretch of imagination. After the 9-0 Supreme Court washout, Treasury and FHFA can pretty much do as they wish (not a legal expert just calling it as I see it).

 

So watching closely from the sidelines as concrete information unfolds. These companies may be great investments in the long run with their business models, and becoming more efficient with AI integration. Looking forward to reinvesting at the right time as the political uncertainties resolve. There is money to be made in the trade after the trade as they say... (maybe Jesse Livermore)

Edited August 16, 2025 by DocSnowball

[TwoCitiesCapital]

Glad we have the right people in charge to tweet about the issues that matter

 

 

[COBFInfinity]

Anyone have thoughts on comparisons to what Trump admin is doing with Intel? I don't know much about the CHIPS Act, but if I understand correctly, Intel (among others) was given a big pile of money with no profit sharing agreement, but profit sharing could have been done in up front, and now the Trump admin is coming in after the fact and saying that the government should have gotten equity then, so they just want to take it now. Is that pretty close to accurate, at a high level?

 

I have never had the slightest confidence that Treasury was going to just write off a huge portion of it's investment so that GSE investors will be "treated fairly", which is why I've always limited myself to preferred stock (has been risky enough for my taste). The Intel example sure seems to support the idea that a corporation's shareholders' rights (whether in conservatorship or not), are not that high on the list of concerns for Trump admin.

 

What do you think?

[TwoCitiesCapital]

On 8/19/2025 at 8:38 PM, COBFInfinity said:

Anyone have thoughts on comparisons to what Trump admin is doing with Intel? I don't know much about the CHIPS Act, but if I understand correctly, Intel (among others) was given a big pile of money with no profit sharing agreement, but profit sharing could have been done in up front, and now the Trump admin is coming in after the fact and saying that the government should have gotten equity then, so they just want to take it now. Is that pretty close to accurate, at a high level?

 

I have never had the slightest confidence that Treasury was going to just write off a huge portion of it's investment so that GSE investors will be "treated fairly", which is why I've always limited myself to preferred stock (has been risky enough for my taste). The Intel example sure seems to support the idea that a corporation's shareholders' rights (whether in conservatorship or not), are not that high on the list of concerns for Trump admin.

 

What do you think?

 

Yes. 

[orthopa]

On 8/19/2025 at 9:38 PM, COBFInfinity said:

Anyone have thoughts on comparisons to what Trump admin is doing with Intel? I don't know much about the CHIPS Act, but if I understand correctly, Intel (among others) was given a big pile of money with no profit sharing agreement, but profit sharing could have been done in up front, and now the Trump admin is coming in after the fact and saying that the government should have gotten equity then, so they just want to take it now. Is that pretty close to accurate, at a high level?

 

I have never had the slightest confidence that Treasury was going to just write off a huge portion of it's investment so that GSE investors will be "treated fairly", which is why I've always limited myself to preferred stock (has been risky enough for my taste). The Intel example sure seems to support the idea that a corporation's shareholders' rights (whether in conservatorship or not), are not that high on the list of concerns for Trump admin.

 

What do you think?

 

 

I think for the reasons  you discuss staying in preferred is still the safest way to go with this. Common under a dollar or whatever was worth the risk for some, ~10 bucks not so sure. 

 

I think the simplest way to think about this is when holding the preferred you aligned with Paulson.  I don't expect either share class to 2-3x etc from here but the one to get hurt the least will certainly be preferred. 

 

2 not horrible things are likely in store for the preferred. Div turn on, or conversion to common. Conversion to common will likely come with some sweetener to grease the skids. There has been some talk that if gov takes a haircut on their stake preferred should too. Im not sure gov should or will take a haircut. Why should they? Pulte already said gov will maximize their investment in Fnf and what is common to do about it if they do? Banks will be clamoring to sell the shares and one would have to believe in the Billionaire circles that many in the admin including Paulson have lined up money otherwise. 

 

One of commons argument's is who would invest in new shares if older shares got screwed. I got news for ya, both common and preferred have gotten screwed. Not a div or claim on earnings for 16-17 years and we are talking about a 30B IPO in a couple months. New money doesn't care about old money and preferred had the biggest advocate of all standing behind Trump during the inauguration. 

 

Im not trying to make it any harder then it already is. Just own the preferred like Paulson and let it ride. There is one reason and one reason only why this is a first year priority for Trump. 

 

The gov also has some interesting options with their investment too. Gov has multiple bites at the apple here, warrants, SPS and Liquidation preference all of which could translate into common equity, maybe traded for debt, all of which or a portion of could go into a SWF or be sold to the public.  Maybe the gov sells the warrants to the public? 

 

Next step is the PSPA announcement I believe which hopefully is in a couple of weeks. With the way things have gone so far no reason to not believe on a Nov/Dec time frame for this all to go down. Ive added another large tranche of preferred as a trade into year end. 

 

 

[TwoCitiesCapital]

1 hour ago, orthopa said:

There has been some talk that if gov takes a haircut on their stake preferred should too. Im not sure gov should or will take a haircut. Why should they?

 

Exactly. Why should they? They already own 100% without putting up any capital. 

 

1 hour ago, orthopa said:

 

Pulte already said gov will maximize their investment in Fnf and what is common to do about it if they do?

 

Hard to get much better than 100% in terms of 'maximizing'. 

 

1 hour ago, orthopa said:

One of commons argument's is who would invest in new shares if older shares got screwed. I got news for ya, both common and preferred have gotten screwed.

 

Exactly, and without a resolution there, I have a hard time believing that big banks can pull off the largest IPO ever when you have active lawsuits and ownership that is contested. 

 

1 hour ago, orthopa said:

Next step is the PSPA announcement I believe which hopefully is in a couple of weeks.

 

This is the next step. I highly doubt we see it in the next few weeks. Trump haf 4-years his first time and the only amendment was rushed in the last few months of his term - not to rectify the prior wrongs but to screw over the next Democratic administration. This time around it's been more of 'we have concepts of a plan' than any actual plan so far. 

 

1 hour ago, orthopa said:

With the way things have gone so far no reason to not believe on a Nov/Dec time 

 

Yes. It's only taken 15+ years of hoping the courts would step in and 4 disappointing years from Trump's first administration with no concrete details of a plan released this time around. No reason to NOT believe it won't get magically done in the next 3 months.

/Sarcasm 

Edited August 23, 2025 by TwoCitiesCapital

[fakemoneyguy]

Because the FHFA and Treasury both sit inside the Executive ""ring fence", and those 2 parties can amend the PSPAs at will, and the PSPAs are the documents that set a lot of the "rules" like needing the lawsuits to get ironed out before raising capital...I would take the stance to look at the situation much more flexibly. All of the rules set by the PSPAs are not actually governing the sequence of events because they can be amended whenever to achieve the Administration's objectives. Bessent's power stems from Trump, so "the Administration's objectives" can be boiled down to "what Trump wants". HERA is the only set of rules in this situation that is statutory, so actually "exist".

 

Future timeline:

-Sep-25: McKernan Senate confirmation

-late Sep/early Oct-25: Treasury chooses lead left bank on capital raise (per Bessent on Fox News this week)

-Oct-25: Treasury + FHFA publish recapitalization strawman(s), architects of which are Jeff Wrase, McKernan at Treasury, and Calabria at OMB. Each has a high level of political know-how (Calabria drafted HERA!)  

 

The Nov-25 timeline is tight for a capital raise, but the Trump Admin acts swiftly on priorities. Still don't know if it happens by then, but think it happens before year end '26. 

 

Don't think you can be in the common at this pricing (Intel example excellent), but think recapitalization structure uncertainty reduction happens fall'25 which is why i am camping in the jr pfds

 

Does anyone have a view on consideration to the jr pfds in different recap scenarios (ie low coups equitize at a discount vs. high coups do not)?

[TwoCitiesCapital]

9 hours ago, fakemoneyguy said:

 the PSPAs are the documents that set a lot of the "rules" like needing the lawsuits to get ironed out before raising capital...

 

I don't think that's just the PSPAs. I don't think you get to organize the largest IPOs i history with lawsuits that contest your ownership and contest how much is owed to the prior/existing equity holders. 

 

Some normal IPOs fail without all of that. And here you want to do the largest IPO in history with all of that hair on it? 

 

9 hours ago, fakemoneyguy said:

I would take the stance to look at the situation much more flexibly. All of the rules set by the PSPAs are not actually governing the sequence of events because they can be amended whenever to achieve the Administration's objectives.

 

It's not the PSPAs holding things up. Those are just a demonstration the administration wasn't serious the first time around because you're right - they could've done what they wanted and this is what they did. 

 

What's holding this ALL up are the court cases. Last I checked, the Treasury is still fighting them and no settlement terms offered. 

 

9 hours ago, fakemoneyguy said:

 

 

9 hours ago, fakemoneyguy said:

 

The Nov-25 timeline is tight for a capital raise, but the Trump Admin acts swiftly on priorities. Still don't know if it happens by then, but think it happens before year end '26. 

 

They have demonstrated the ability to act swiftly - not necessarily effectively or in a well thought out manner. I dont think this is necessarily a priority for the admin, and if I'm wrong there, I still have no confidence it's approached in a thoughtful manner. 

 

9 hours ago, fakemoneyguy said:

Does anyone have a view on consideration to the jr pfds in different recap scenarios (ie low coups equitize at a discount vs. high coups do not)?

 

You have to get the majority of the preferred holders to sign off on this. Those who are still holding likely have been holding for a decade plus. I don't think they were holding out for a discount. 

 

They MAY accept a discount to the higher coupon issues, but I doubt they accept a discount to par - especially when many are hoping for par plus dividend accruals.

[orthopa]

9 hours ago, fakemoneyguy said:

Because the FHFA and Treasury both sit inside the Executive ""ring fence", and those 2 parties can amend the PSPAs at will, and the PSPAs are the documents that set a lot of the "rules" like needing the lawsuits to get ironed out before raising capital...I would take the stance to look at the situation much more flexibly. All of the rules set by the PSPAs are not actually governing the sequence of events because they can be amended whenever to achieve the Administration's objectives. Bessent's power stems from Trump, so "the Administration's objectives" can be boiled down to "what Trump wants". HERA is the only set of rules in this situation that is statutory, so actually "exist".

 

Future timeline:

-Sep-25: McKernan Senate confirmation

-late Sep/early Oct-25: Treasury chooses lead left bank on capital raise (per Bessent on Fox News this week)

-Oct-25: Treasury + FHFA publish recapitalization strawman(s), architects of which are Jeff Wrase, McKernan at Treasury, and Calabria at OMB. Each has a high level of political know-how (Calabria drafted HERA!)  

 

The Nov-25 timeline is tight for a capital raise, but the Trump Admin acts swiftly on priorities. Still don't know if it happens by then, but think it happens before year end '26. 

 

Don't think you can be in the common at this pricing (Intel example excellent), but think recapitalization structure uncertainty reduction happens fall'25 which is why i am camping in the jr pfds

 

Does anyone have a view on consideration to the jr pfds in different recap scenarios (ie low coups equitize at a discount vs. high coups do not)?

 

 

I agree with nearly everything here. 

 

Ive made it easily mentally on myself and thought that Paulson will do whats best for Paulson. Trump as you mention is a direct extension of that. Paulson(preferred) will sneak out ahead under the guise of a huge 30B (and billions more in the future) windfall for the gov. 

 

I think all options are on the table for treatment of the preferred. 

 

Do they call the high div preferred and keep the low div? FNMAS has to be called by 12/31/2025, if not its 5 more years and that's the highest div rate. 

Do they convert based on div rate % wise ie more shares for higher div etc. Citi did this in 2008 I belive. 

Do they just turn the divs on? Current preferred rates not too out of line of current TBTF bank div rates. This would allow many of the higher div preferred trade well above par.

 

Its probably not worth the mental gymnastics to try to nail down a specific scenario as everything on the table IMO. Id love divs to be turned on, that would essentially give me retirement level annual income. If converted to common and the float is low and FNF grow over time it will be a mulitple of the conversion price hopefully with a div. 

 

At this point I feel like if its heads I win, tails I win too. 

 

[orthopa]

On 8/23/2025 at 2:34 PM, TwoCitiesCapital said:

 

Exactly. Why should they? They already own 100% without putting up any capital. 

 

 

Hard to get much better than 100% in terms of 'maximizing'. 

 

 

Exactly, and without a resolution there, I have a hard time believing that big banks can pull off the largest IPO ever when you have active lawsuits and ownership that is contested. 

 

 

This is the next step. I highly doubt we see it in the next few weeks. Trump haf 4-years his first time and the only amendment was rushed in the last few months of his term - not to rectify the prior wrongs but to screw over the next Democratic administration. This time around it's been more of 'we have concepts of a plan' than any actual plan so far. 

 

 

Yes. It's only taken 15+ years of hoping the courts would step in and 4 disappointing years from Trump's first administration with no concrete details of a plan released this time around. No reason to NOT believe it won't get magically done in the next 3 months.

/Sarcasm 

 

 

Which Lawsuits are you referring to? In Lamberth preferred holders got a pittance compared to what they could get in a recap scenario and is being paid by Fannie and Freddie anyway which would hurt the recap math.  They have already reserved the $$ for payout but collecting on them as a shareholder does nothing with an IPO option.  Gov will appeal(cant remember if they did already) and threaten to drag out for years more. Who wins in that scenario? Shareholders want their money and gov wants 30Billion.   I believe there is one other lawsuit that is DOA about the common and current PSPA allows for up to 5B of lawsuit damages in a recap scenario. 

 

Lawsuits are not going to stop this. That ship has sailed. Essentially shareholder rights to pre sweep $$$ is gone. Everyone's eye is on the $$$ to be made going forward. 

[fakemoneyguy]

@TwoCitiesCapital you are right that the litigation uncertainty adds some overhang. Perhaps the cap table is structured where a sliver of equity is used as currency in settlements? I think only Fairholme v. FHFA and Rop v. FHFA are still outstanding (though there will be incremental litigation as part of the recapitalization). Nov-25 timing is almost impossible you would think if litigation risk cannot be structured around as part of the capital raise

 

It took me months to appreciate that it is a priority for the Administration. I can't place my finger on exactly why. It is NOT to save the "retirement savings of hardworking Americans" per Trump's letter to Rand Paul, and probably skews more in the "one time windfall" "monetization of the balance sheet" direction. But Trump is posting about it on Truth Social, Bessent is now speaking to it directly instead of dancing around it, bankers are involved (which means fees are involved which means incentives are aligned to jam through a capital raise) etc. 

 

Re: consideration % of par, if jr pfds don't accept, low coups will probably trade to HSD% yields, which is south of par, in some cases considerably so. If I was structuring the recap, I'd probably keep the low coups outstanding and take out the high coups. 

 

[orthopa]

6 hours ago, fakemoneyguy said:

@TwoCitiesCapital you are right that the litigation uncertainty adds some overhang. Perhaps the cap table is structured where a sliver of equity is used as currency in settlements? I think only Fairholme v. FHFA and Rop v. FHFA are still outstanding (though there will be incremental litigation as part of the recapitalization). Nov-25 timing is almost impossible you would think if litigation risk cannot be structured around as part of the capital raise

 

It took me months to appreciate that it is a priority for the Administration. I can't place my finger on exactly why. It is NOT to save the "retirement savings of hardworking Americans" per Trump's letter to Rand Paul, and probably skews more in the "one time windfall" "monetization of the balance sheet" direction. But Trump is posting about it on Truth Social, Bessent is now speaking to it directly instead of dancing around it, bankers are involved (which means fees are involved which means incentives are aligned to jam through a capital raise) etc. 

 

Re: consideration % of par, if jr pfds don't accept, low coups will probably trade to HSD% yields, which is south of par, in some cases considerably so. If I was structuring the recap, I'd probably keep the low coups outstanding and take out the high coups. 

 

 

The whole reason this is being done is Paulson. Paulson has bankrolled 3 of Trumps presidential runs. 

 

https://www.newsweek.com/trump-campaign-says-fifty-million-haul-palm-beach-paulson-fundraiser-doubled-biden-1887679

 

https://www.bloomberg.com/news/articles/2024-04-05/election-2024-john-paulson-is-raising-43-million-for-trump?embedded-checkout=true

 

https://www.fa-mag.com/news/ex-soros-star-scott-bessent-jockeys-with-john-paulson-to-run-trump-s-treasury-78130.html

 

Do a little reading, its not hard to figure out why this is happening. 

 

https://www.politico.com/live-updates/2024/11/12/congress/paulson-withdraws-from-treasury-contention-00189010

 

“Although various media outlets have mentioned me as a candidate for Secretary of the Treasury, my complex financial obligations would prevent me from holding an official position in President Trump’s administration at this time,” Paulson said in a statement.

 

Complicated for sure when you need the treasury secretary to sign off on a PSPA agreement to recap FNF. 

Edited September 1, 2025 by orthopa

[fakemoneyguy]

@orthopa you think it is that simple? If Paulson dies tomorrow (crystallizes "key man" risk), are you a seller?

 

https://wtop.com/inauguration/2025/01/billionaires-tech-titans-presidents-a-guide-to-who-stood-where-at-trumps-inauguration/

Paulson sat next to Adelson and Wiles in the inauguration ceremony (inner circle seating) so it might be

 

https://www.wsj.com/politics/trump-inauguration-who-attended-seating-chart-47cb48bf?mod=e2tw

But Tim Cook sat inner circle at Trump's inauguration too. AAPL's supply chain is Chinese, and Trump has been decoupling from Chinese supply chains since he was elected. 

 

[COBFInfinity]

28 minutes ago, fakemoneyguy said:

@orthopa you think it is that simple? If Paulson dies tomorrow (crystallizes "key man" risk), are you a seller?

 

 

With respect to the GSE's, I'd be a lot more concerned about the mortality of Trump than of Paulson.