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

[Sweet]

34 minutes ago, COBFInfinity said:

Dude, you haven't even researched these companies, have you? The SPS value is IN ADDITION TO the 80% warrants on common. You might want to start looking at that.

 

Yes I have, though this is coming on 8 years ago!  Sorry.

 

If it is in addition, and the preference is 300 bn liquidation, plus the warrants... then yeh common is going to get roasted.

 

17 minutes ago, gfp said:

 

Curious what you mean by this

 

Trump was talking the other day about getting troops paid.  He's on the scrounge for money.  And if this whole saga has taught me anything its that the government can act first and kick the litigation down the road.  Trump is a person who will side skirt normal spending rules if he can, and I believe in a government shutdown, the executive office have much more power on spending decisions.

[orthopa]

10 hours ago, Sweet said:

Do you guys really think the gov is going to write off the senior preferred?

 

The government wants the money, it’s especially important to trump with the shut down.

 

I could see all shareholders (preferred and common)wiped out.

 

What about Trump’s friends who are invested?  He could give them foreknowledge of their plan so they could quietly exit.

 

 

So with Preferred being wiped out they are going to put them in receivership? Then what? IPO them out of receivership? What are you even talking about lol. 

 

If he was going to give them the heads up he should have told Paulson back last summer when they were starting to work on FnF that. Hey John I know you bankrolled by campaign 3 times but we are going to work on FnF for 2 years straight, get everyone confirmed that we need to take them public then at the last minute bend you over so you dont get paid. Oh and you could have been Treasury secretary but I lied to you and Im going to fuck you at the last minute after Bessent and Pulte go all over the media talking out taking them public just to get your hopes up!!!  lol Jesus Christ, that statement alone tells me you don't have a grip on the current situation. 

 

And no Sr Preferred does not get forgiven. Thus stay out of common. 

 

[orthopa]

4 hours ago, COBFInfinity said:

Dude, you haven't even researched these companies, have you? The SPS value is IN ADDITION TO the 80% warrants on common. You might want to start looking at that.

 

He/she doesnt, best to ignore going forward. 

[COBFInfinity]

32 minutes ago, orthopa said:

 

He/she doesnt, best to ignore going forward. 

 

Yeah, I'm actually finding it hard to have any meaningful discussion about these companies lately.

[This2ShallPass]

Since you guys know it all, why does the common continue to trade at these levels? This board has been predicting common to be worth nothing for a long long time. Because we value investors are so smart and everyone else including guys like Ackman are idiots?? Or maybe it's not so bad to at least look at things from their perspective to understand what they see.

 

I agree if things go the way they typically do, SPS won't be forgiven and common is wiped out. But the admin has placed a priority on a big IPO and a big valuation, I do not believe when govt makes decisions they do solely on financial reasons.

 

I personally haven't followed for a while and got interested recently again. I bought shares in 2022 around $0.6-0.7 mostly as a lottery ticket. Buy and forget. Sold earlier this year ~$5 avg as I couldn't see how common could be worth anything.

 

But as I said, when it continues to trade higher, I at least want to understand why. Open to discuss with anyone other than the know it alls..

 

 

[COBFInfinity]

48 minutes ago, This2ShallPass said:

Since you guys know it all, why does the common continue to trade at these levels? This board has been predicting common to be worth nothing for a long long time. Because we value investors are so smart and everyone else including guys like Ackman are idiots?? Or maybe it's not so bad to at least look at things from their perspective to understand what they see.

 

I agree if things go the way they typically do, SPS won't be forgiven and common is wiped out. But the admin has placed a priority on a big IPO and a big valuation, I do not believe when govt makes decisions they do solely on financial reasons.

 

I personally haven't followed for a while and got interested recently again. I bought shares in 2022 around $0.6-0.7 mostly as a lottery ticket. Buy and forget. Sold earlier this year ~$5 avg as I couldn't see how common could be worth anything.

 

But as I said, when it continues to trade higher, I at least want to understand why. Open to discuss with anyone other than the know it alls..

 

 

 

The only argument I see from common holders as to why SPS should be written off as that "it's fair", or "it's the right thing to do." There are no legal arguments anymore because SCOTUS wiped them all out. Investors price things in questionable ways all the time, so I'm not going to attempt to understand everything. But I am definitely not going to take an investment stance assuming that Treasury just decides to give up all the value of the SPS that it has fought so hard in court to keep over many years - and that has included Trump's Treasury all along.

[This2ShallPass]

4 minutes ago, COBFInfinity said:

 

The only argument I see from common holders as to why SPS should be written off as that "it's fair", or "it's the right thing to do." There are no legal arguments anymore because SCOTUS wiped them all out. Investors price things in questionable ways all the time, so I'm not going to attempt to understand everything. But I am definitely not going to take an investment stance assuming that Treasury just decides to give up all the value of the SPS that it has fought so hard in court to keep over many years - and that has included Trump's Treasury all along.

Fair enough. I think what they're saying is not just fair but the net worth sweep until 2020 has paid the government back with interest. 

 

From Gemini:

 

From the start of the conservatorship in 2008 through the end of 2019, Fannie Mae and Freddie Mac paid a combined total of approximately $301 billion to the U.S. Treasury.

Here is the breakdown:

• Fannie Mae: Paid approximately $181.4 billion.

• Freddie Mac: Paid approximately $119.7 billion.
  
  This total is significantly more than the $191.4 billion the two companies drew from the Treasury during the 2008 financial crisis.

[COBFInfinity]

50 minutes ago, This2ShallPass said:

Fair enough. I think what they're saying is not just fair but the net worth sweep until 2020 has paid the government back with interest. 

 

From Gemini:

 

From the start of the conservatorship in 2008 through the end of 2019, Fannie Mae and Freddie Mac paid a combined total of approximately $301 billion to the U.S. Treasury.

Here is the breakdown:

• Fannie Mae: Paid approximately $181.4 billion.

• Freddie Mac: Paid approximately $119.7 billion.
  
  This total is significantly more than the $191.4 billion the two companies drew from the Treasury during the 2008 financial crisis.

 

But so what? This is an argument that utterly fell apart over 4 years ago when SCOTUS ruled on Collins case. Trump's Treasury lawyers fought tooth and nail to say that NWS was legit, and SCOTUS gave it a rubber stamp. SPS is equity, not a debt that can be paid down. So the entire value is still on the company's balance sheets. So did Trump now decide to just forgive all of that value this time around, when he could have done so (and shareholders were definitely asking for) in his first administration? Maybe he did, but there is no evidence of that as of today.

 

Listen, I have owned JPS continuously since 2014. I know that the NWS has screwed investors in a major way. But legally, the argument that Treasury has "gotten it's money back" is utterly meaningless.

[oscarazocar]

9 minutes ago, COBFInfinity said:

 

But so what? This is an argument that utterly fell a  Tpart over 4 years ago when SCOTUS ruled on Collins case. Trump's Treasury lawyers fought tooth and nail to say that NWS was legit, and SCOTUS gave it a rubber stamp. SPS is equity, not a debt that can be paid down. So the entire value is still on the company's balance sheets. So did Trump now decide to just forgive all of that value this time around, when he could have done so (and shareholders were definitely asking for) in his first administration? Maybe he did, but there is no evidence of that as of today.

 

Listen, I have owned JPS continuously since 2014. I know that the NWS has screwed investors in a major way. But legally, the argument that Treasury has "gotten it's money back" is utterly meaningless.

 

Shareholders of common equity of Fannie Mae/Freddie complain about the NWS, but one argument I have found persuasive on the other side is that the only reason that Fannie/Freddie make such large profits is because of the implicit government backing.  Shareholders are trying to have their cake and eat it too - keeping the profits due to the government backing but then complaining .  When everything went sideways, the government stepped in and took ownership, and that was ruled legal by the Supreme Court.  That doesn't seem entirely unfair in the scheme of things.  The entities were insolvent post-GFC and the government stepped in.  When companies file Chapter 11 and ownership gets reshuffled, the old equity shareholders don't get a claim when 10 years later the company is making tons of money.  Shareholders don't like how the ownership was reshuffled in this case (first 80% to government, then 100%), but that ship has sailed legally.  Of course, the government could reshuffle ownership again, but that seems like entirely a political decision and claims of "fairness" ring hollow to me.

[Sweet]

4 hours ago, orthopa said:

 

 

So with Preferred being wiped out they are going to put them in receivership? Then what? IPO them out of receivership? What are you even talking about lol. 

 

If he was going to give them the heads up he should have told Paulson back last summer when they were starting to work on FnF that. Hey John I know you bankrolled by campaign 3 times but we are going to work on FnF for 2 years straight, get everyone confirmed that we need to take them public then at the last minute bend you over so you dont get paid. Oh and you could have been Treasury secretary but I lied to you and Im going to fuck you at the last minute after Bessent and Pulte go all over the media talking out taking them public just to get your hopes up!!!  lol Jesus Christ, that statement alone tells me you don't have a grip on the current situation. 

 

And no Sr Preferred does not get forgiven. Thus stay out of common. 

 

I have no idea what sequence you are running through your head with the above diatribe, or the imagined conversations.

 

I find it hard to believe that you guys don’t have common or preferred getting wiped out as a possibility and a new entity with a new share structure created instead.

 

I’ve been in an out of FNMA several times, and there were times when the share price was low that this was thought to be a real possibility.  Apparently not anymore.

If I’m the Treasury and I’m trying to maximise the value for the Treasury, why would I want complicating and dilution common and junior preferred ownership?

[This2ShallPass]

3 hours ago, oscarazocar said:

Of course, the government could reshuffle ownership again, but that seems like entirely a political decision and claims of "fairness" ring hollow to me.

Yes. If Trump admin decides SPS is deemed repaid, they will use the simple argument that Treasury has been paid $300B to justify. If they decide to enforce SPS claim, they can as well easily say SCOTUS already ruled in our favor.

 

To be deterministic and say with confidence common will be worth zero is not the right position to take. 

 

 

[TwoCitiesCapital]

On 10/13/2025 at 11:39 AM, oscarazocar said:

 

Shareholders of common equity of Fannie Mae/Freddie complain about the NWS, but one argument I have found persuasive on the other side is that the only reason that Fannie/Freddie make such large profits is because of the implicit government backing.  Shareholders are trying to have their cake and eat it too - keeping the profits due to the government backing but then complaining .

 

The govt had an implicit backing before the NWS. If the govt wants to charge a fee for that - they are entitled to, should, and I agree. 

 

Stealing 100% of the companies is NOT the payment for implicit/explicit backing. 

 

On 10/13/2025 at 11:39 AM, oscarazocar said:

When everything went sideways, the government stepped in and took ownership, and that was ruled legal by the Supreme Court.  That doesn't seem entirely unfair in the scheme of things.  The entities were insolvent post-GFC and the government stepped in. 

 

The companies were insolvent AFTER the govt stepped in, forced the write down of a ton of assets (that were eventually reversed with 100% of the reversal flowing to gov't coffers).  Privatized the loss - socialized the reversal of those losses. 

 

I'm not going to argue whether the bailouts were needed or not - I don't want to second guess decisions made in a moment of crisis and understand why the decisions were made. 

 

But forcing accounting entries to make them seem insolvent on paper, giving them cash to plug that imaginary hole, and then changing the terms years after the crisis so the cash can never be repaid once the hole was discovered to be imaginary, isn't the 'saving' of the companies as you've painted it. It's an abuse of power and theft of private property. 

 

On 10/13/2025 at 11:39 AM, oscarazocar said:

When companies file Chapter 11 and ownership gets reshuffled, the old equity shareholders don't get a claim when 10 years later the company is making tons of money. 

 

Then they should have allowed the company to go through bankruptcy - at which point  its very possible that it would have been seen for what it was - a liquidity crisis, not an insolvency crisis, and there would have been residual value for equity holders upon their release. They didn't do this and is thus bankruptcy is an irrelevant comparison. 

 

What they did do is force write downs, lend money to plug the whole from those write downs, negotiate with themselves to change the terms the money was lent at, and then assumed 100% control/profits/capital when it was obvious the entire downs weren't needed and would be reversing. And they did without ever paying  to convert their warrants for 80% ownership and without paying shareholders for the remaining 20% on the table. 

 

On 10/13/2025 at 11:39 AM, oscarazocar said:

 

Shareholders don't like how the ownership was reshuffled in this case (first 80% to government, then 100%), but that ship has sailed legally.  Of course, the government could reshuffle ownership again, but that seems like entirely a political decision and claims of "fairness" ring hollow to me.

 

Shareholders don't like that they were lied to and that the government was able to steal 100% of the companies with what essentially worked out to be a short term loan for a fraction of the cost. 

 

[Mephistopheles]

Can anyone paint me a scenario in which preferred holders get screwed but the IPO still goes through?

 

Still selling for 40-60% of par depending on the breed. Seems like a no brainer if you assume that Trump will do what he wants here (IPO).

 

Pretty much every other thing that he said he will do, has been done. 

[COBFInfinity]

3 hours ago, Mephistopheles said:

Can anyone paint me a scenario in which preferred holders get screwed but the IPO still goes through?

 

Still selling for 40-60% of par depending on the breed. Seems like a no brainer if you assume that Trump will do what he wants here (IPO).

 

Pretty much every other thing that he said he will do, has been done. 

 

One hypothetical would be if they don't plan to pay common dividends for a long time and could choose not to pay preferred dividends during that period. Thus, the preferred don't get screwed, exactly, but would still trade at a hefty discount compared to if they are cash flowing. Most people expect that common dividends will be paid quickly after recapitalization as that is what investors will be looking for, but it's not guaranteed.

[sholland]

6 hours ago, Mephistopheles said:

Can anyone paint me a scenario in which preferred holders get screwed but the IPO still goes through?

 

Still selling for 40-60% of par depending on the breed. Seems like a no brainer if you assume that Trump will do what he wants here (IPO).

 

Pretty much every other thing that he said he will do, has been done. 

 

https://www.wsj.com/finance/banking/fannie-freddie-ipo-big-banks-6d8884aa?mod=Searchresults&pos=1&page=1
 

“At least one bank suggested that the government issue shares in the IPOs that get preference over the Treasury Department’s senior preferred shares to mitigate investors’ risk, people familiar with the matter said.”

[Mephistopheles]

On 10/20/2025 at 6:56 PM, COBFInfinity said:

 

One hypothetical would be if they don't plan to pay common dividends for a long time and could choose not to pay preferred dividends during that period. Thus, the preferred don't get screwed, exactly, but would still trade at a hefty discount compared to if they are cash flowing. Most people expect that common dividends will be paid quickly after recapitalization as that is what investors will be looking for, but it's not guaranteed.

 

True, but I suppose they can't go forever without paying common dividends - unless the common remain perpetually undervalued and they just buy back stock without dividends but what happens when it becomes fair or overvalued? You're right they can do this, but still in this scenario I'd say some of these Freddie prefs that are STILL 40 cents on the dollar would move up maybe to 70-80?

[Mephistopheles]

On 10/20/2025 at 10:00 PM, sholland said:

 

https://www.wsj.com/finance/banking/fannie-freddie-ipo-big-banks-6d8884aa?mod=Searchresults&pos=1&page=1
 

“At least one bank suggested that the government issue shares in the IPOs that get preference over the Treasury Department’s senior preferred shares to mitigate investors’ risk, people familiar with the matter said.”

 

Interesting - though, I suppose these shares would get preference over current common (and prefs) as well..

[COBFInfinity]

9 hours ago, Mephistopheles said:

 

True, but I suppose they can't go forever without paying common dividends - unless the common remain perpetually undervalued and they just buy back stock without dividends but what happens when it becomes fair or overvalued? You're right they can do this, but still in this scenario I'd say some of these Freddie prefs that are STILL 40 cents on the dollar would move up maybe to 70-80?

 

A HUGE question I have (with many dollars of impact to be determined) is what yield will the fixed JPS trade at when fully recapitalized? One could argue that they'll be better capitalized than ever before and therefore justify a yield that is in line or even lower than a money center bank. Alternatively (and my view) is that knowledge that a future FHFA can legally screw over shareholders should justify a higher yield. This is one of those rare instances when I hope the market disagrees with me and takes an optimistic view!

 

So a 5% JPS coupon (or one of the various floaters) might trade at 85-90% of par in the optimistic scenario and 70-75% of the par in the less optimistic scenario. If JPS dividends aren't expected for a number of years, maybe they only trade at 50-60% of par in the shorter term. So I think JPS prices remain relatively low for good reason, until there is certainty and clarity on what a restructuring actually looks like.

[Mephistopheles]

1 hour ago, COBFInfinity said:

 

A HUGE question I have (with many dollars of impact to be determined) is what yield will the fixed JPS trade at when fully recapitalized? One could argue that they'll be better capitalized than ever before and therefore justify a yield that is in line or even lower than a money center bank. Alternatively (and my view) is that knowledge that a future FHFA can legally screw over shareholders should justify a higher yield. This is one of those rare instances when I hope the market disagrees with me and takes an optimistic view!

 

So a 5% JPS coupon (or one of the various floaters) might trade at 85-90% of par in the optimistic scenario and 70-75% of the par in the less optimistic scenario. If JPS dividends aren't expected for a number of years, maybe they only trade at 50-60% of par in the shorter term. So I think JPS prices remain relatively low for good reason, until there is certainty and clarity on what a restructuring actually looks like.

To the bolded part above - if we assume they’re rational actors (questionable), they’d want to bend over backwards to show that they won’t steal these companies again, for the sake of getting max value out of the IPOs. 
 

To me it’s crazy for there to be an IPO with the perpetual fear of theft. So they either guarantee to not steal the IPO shares, which means the JPS should get precedence. Or the perpetual theft threat remains and the IPO value gets cut in half.

 

Of course this is all speculation but, if they’re gonna actually IPO, they’re gonna do the path of least resistance which is honor the JPS, IMO.

 

But then again I’ve been waiting for 13 years…

Edited October 24, 2025 by Mephistopheles

[COBFInfinity]

7 hours ago, Mephistopheles said:

To the bolded part above - if we assume they’re rational actors (questionable), they’d want to bend over backwards to show that they won’t steal these companies again, for the sake of getting max value out of the IPOs. 
 

To me it’s crazy for there to be an IPO with the perpetual fear of theft. So they either guarantee to not steal the IPO shares, which means the JPS should get precedence. Or the perpetual theft threat remains and the IPO value gets cut in half.

 

Of course this is all speculation but, if they’re gonna actually IPO, they’re gonna do the path of least resistance which is honor the JPS, IMO.

 

But then again I’ve been waiting for 13 years…

 

It shouldn't even matter what the government says/does to restructure - the past robbery raises the risk of a future robbery that doesn't exist with most companies. However, the investor class tends to be greedy and short-sighted, making the same mistakes over and over. But it seems absurd to think that preferred stocks that haven't paid a dividend in over 17 years would just start trading as if they are a pristine credit. But maybe, and hopefully, that is what the market decides.

[fakemoneyguy]

Does anyone have plausible left tail scenarios for the JPS? I see political momentum (McKernan confirmation, bankers bake-off), and the messaging is that he government wants a mark-to-market on its position (80% common + SPS), so I don't think a share issuance with priority above the SPS is feasible. 

 

JPS get 0'd in a receivership, but if the goal is to not create uncertainty in the mortgage markets (to keep spreads unch'd), a receivership works against that goal. 

 

If there is a window to tap the public markets, and that window is missed it is still mid teens IRR to exit at the end of Trump's term on the higher coup FNMA JPS. 

 

Other than further escalation with China (which I fade because Trump is a pacifist), I don't see plausible scenarios where JPS are donuts. Trying to think through position sizing more than anything else  

[sholland]

On 10/24/2025 at 2:23 PM, fakemoneyguy said:

Does anyone have plausible left tail scenarios for the JPS? I see political momentum (McKernan confirmation, bankers bake-off), and the messaging is that he government wants a mark-to-market on its position (80% common + SPS), so I don't think a share issuance with priority above the SPS is feasible. 

https://www.wsj.com/finance/banking/fannie-freddie-ipo-big-banks-6d8884aa?mod=Searchresults&pos=1&page=1

 

“At least one bank suggested that the government issue shares in the IPOs that get preference over the Treasury Department’s senior preferred shares to mitigate investors’ risk, people familiar with the matter said.“

 

Not my base case, but I think a share issuance with priority above SPS is feasible and can mark-to-market the SPS.  Warrants, common shares, and JPS may be worth zero in such a scenario. It’s enough of a risk for me that I exited after being a shareholder for 11 years.  
 

Trump always assumes negotiation dominance. The government currently owns 100% of earnings.  I am sure the Wall Street geniuses can find a way to maximize value to U.S taxpayers without sharing any with JPS and common shareholders. I don’t know how this plays out.  An inconveniently long time is almost as bad.

[This2ShallPass]

17 hours ago, sholland said:

Not my base case, but I think a share issuance with priority above SPS is feasible and can mark-to-market the SPS.  Warrants, common shares, and JPS may be worth zero in such a scenario. It’s enough of a risk for me that I exited after being a shareholder for 11 years.  

It's definitely a tail risk, this is what is keeping me from going all in on pref. But wiping out JPS is guaranteed to lead to lawsuits which will delay the IPO indefinitely. I'm not sure the admin wants that. Big picture, if the govt converts SPS + LP they will make plenty of money without the need to screw JPS. 

 

I decided to take a 4% position (1/3rd common and 2/3rd pref). 

 

 

[gfp]

Billy Ackman with a plan for Donald ->

 

[Mephistopheles]

1 hour ago, gfp said:

Billy Ackman with a plan for Donald ->

 

 

He was at the white house yesterday with a bunch of other finance bros (Dimon, Fink etc.)

 

At least for a trade, it's got to be worth picking up some common and prefs as they've both come down nicely last couple of days.