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

[COBFInfinity]

10 hours ago, TwoCitiesCapital said:

 

And they have yet to explain how he accomplishes that with 80% of something vs 100% of something. 

 

Right now - he controls 100% of their cash flows. Why would a control freak/micromanager give that up so he can only own 80% and not have control of any cash flows? 

 

Not sure if you're talking about the widely held view among common shareholders that the SPS will be written off for no value (of which I have never been convinced), but JPS holders want monetization, too, for whatever reason the Treasury wants to use that money.

 

Unfortunately, the path of least resistance if Trump only cares about getting money out is to re-start a dividend on the SPS. They could even do the NWS again - SCOTUS said they can do whatever they want. No complicated changes or stock sales necessary to do that. Ending the conservatorships requires a man of principle who actually believes that the companies should not be controlled by the government. Alas, Trump is one of the most un-principled people on the planet.

[COBFInfinity]

8 hours ago, Mephistopheles said:

100% of the cash flows for 3 years only, vs 80% of the DCF for eternity. The latter is the better bet. 

 What, is everyone here now just going along with the commons' prayer that SPS is written off and Treasury will only own 80%? I assume it will be 90+%.

 

Anyway, the issue with your statement either way is that during Trump's term, they won't be able to sell the entire stake, so he doesn't get access to all those funds, just a portion. As I said above, it would be a lot easier to just cash flow the SPS again - Trump keeps control and gets a bunch of cash.

[sholland]

summary of my post from 12 hours ago:

• IPO is not to raise money for Fannie or Freddie, but rather to monetize the government’s stake.
• FHFA director Bill Pulte expects IPO to happen and F2 to remain in Conservatorship.
• At least one bank proposed IPOing shares senior to the government’s senior preferred shares.
• Administration officials “show no interest” in relaxing the current capital structure.  (Lynchpin of Ackman’s and Burry’s theses)

[TwoCitiesCapital]

1 hour ago, COBFInfinity said:

 What, is everyone here now just going along with the commons' prayer that SPS is written off and Treasury will only own 80%? I assume it will be 90+%.

 

Anyway, the issue with your statement either way is that during Trump's term, they won't be able to sell the entire stake, so he doesn't get access to all those funds, just a portion. As I said above, it would be a lot easier to just cash flow the SPS again - Trump keeps control and gets a bunch of cash.

 

I was just generalizing using their warrants/stake. 

 

I have no clue what happens to the SPS, what it worth, how it converts to common, etc to have thrown out any other numbers. I don't actually believe 80% is the right number 

 

The point still stands that <100% ownership and limited control over cash flows is not as good as 100% ownership and 100% control over cash flows. 

Edited January 16 by TwoCitiesCapital

[TwoCitiesCapital]

9 hours ago, Mephistopheles said:

100% of the cash flows for 3 years only, vs 80% of the DCF for eternity. The latter is the better bet.

 

Only if you care about the future instead of your 3-years. Trump doesn't strike me as a long term thinker with the way he upends trade agreements every 4-years to make himself look "strong" on blue collar jobs. 

 

9 hours ago, Mephistopheles said:

Also - the cash flows are all staying within the firms. The govt is only getting an accounting gain…

 

True. And yet he can still steer them as he's doing with $200 billion in mortgage purchases. And has been pointed out, all he has to do to make another amendment to the SPS so they pay it out again. 

 

9 hours ago, Mephistopheles said:

But all the incentives for all parties are to release … big payout for Trump, all the bankers, Ackman.

 

The incentives make this a screaming buy, but I agree that it’s all been gaslighting thus far.

 

You say this, and yet they're still in C-ship with an ever increasing government liquidation preference 15 years later. If the incentives are so obvious, how have they failed for over a decade?

 

Particularly after the removal of shareholders rights/economic claims by the courts which should make anyone even MORE wary of getting involved. 

[Mephistopheles]

3 minutes ago, TwoCitiesCapital said:

Only if you care about the future instead of your 3-years. Trump doesn't strike me as a long term thinker with the way he upends trade agreements every 4-years to make himself look "strong" on blue collar jobs. 

Well that’s what I’m saying. He doesn’t care about 100% cash flows forever. He’d much rather take 80% of the full value up front which is a much bigger number. 

[TwoCitiesCapital]

37 minutes ago, Mephistopheles said:

Well that’s what I’m saying. He doesn’t care about 100% cash flows forever. He’d much rather take 80% of the full value up front which is a much bigger number. 

 

 

Your implying that he sells the government's whole stake to have the cash to use. That won't happen. And if it does, probably getting significantly less than the DCF value of the stocks when you'd be dumping that much stock onto the market all at once hoping their are flows to absorb it. 

 

80% of public vs 100% of private only looks better on paper and Trump doesn't give a crap about how it looks. He wants the control and public listings and getting rid of the Senior Preferred don't do that. 

Edited January 16 by TwoCitiesCapital

[Mephistopheles]

^Apologies forgot to reply.

 

Luckily I sold a bunch between 9-11$ in the new year, still have some shares.

 

I am just treating this is as a trading sardine going forward. On that note - Trump and Ackman met today to talk about those newborn accounts. Possible some rumors leak again and there is another upswing given how much the shares have come down.

 

Rinse and repeat

[Mephistopheles]

https://www.realtor.com/news/real-estate-news/republicans-crafting-bill-to-end-conservatorship-of-fannie-mae-and-freddie-mac/

 

Not the White House this time...but Congress?!

 

 

[TwoCitiesCapital]

1 hour ago, Mephistopheles said:

https://www.realtor.com/news/real-estate-news/republicans-crafting-bill-to-end-conservatorship-of-fannie-mae-and-freddie-mac/

 

Not the White House this time...but Congress?!

 

 

This is more of how I envision the process SHOULD work. 

 

But I was skeptical Trump would give up 100% of the piggy bank and full control in exchange for 80% and no control. 

 

I'm even more skeptical he gives up the piggy bank and receives nothing in exchange. 

Edited February 12 by TwoCitiesCapital

[Mephistopheles]

4 minutes ago, TwoCitiesCapital said:

 

This is more of how I envision the process SHOULD work. 

 

But I was skeptical Trump would give up 100% of the piggy bank and full control in exchange for 80% and no control. 

 

I'm even more skeptical he gives up the piggy bank and receives nothing in exchange. 

 

Yea, I've learned that these are just trading sardines. Shares are down 50% from the peak, sentiment is low. I bought a bunch more. Sentiment will shift and they'll run up and will sell. 

 

But, if they actually do introduce legislation should be a huge short term catalyst given the current price. 

[COBFInfinity]

17 hours ago, Mephistopheles said:

 

Yea, I've learned that these are just trading sardines. Shares are down 50% from the peak, sentiment is low. I bought a bunch more. Sentiment will shift and they'll run up and will sell. 

 

But, if they actually do introduce legislation should be a huge short term catalyst given the current price. 

 

Why would you expect a catalyst from legislation that everyone knows won't pass?

[TwoCitiesCapital]

On 2/12/2026 at 3:02 PM, Mephistopheles said:

 

Yea, I've learned that these are just trading sardines. Shares are down 50% from the peak, sentiment is low. I bought a bunch more. Sentiment will shift and they'll run up and will sell. 

 

But, if they actually do introduce legislation should be a huge short term catalyst given the current price. 

 

Agreed it *could* be. Also agreed that has been said since I bought in 2012. 

 

Single digits on the $50 pars is what I am waiting for. These things traded as low as $2-3 during Biden's tenure. And buying them at those prices and selling at $12-20 is the is the only thing that has kept this from being a total disaster of an investment for me. 

 

$16 on $50 par just doesn't strike me as a steal for something whose probability of happening keeps getting worse with each passing administration. If they were at $7-8, I'd start to be interested again. 

 

Edited March 18 by TwoCitiesCapital

[TwoCitiesCapital]

Another week like the last one - and these things will be at the single digit prices I was waiting for. I missed selling the hype on these in 2019. Glad I didn't miss it in 2025. 

 

But I hear an IPO is imminent...

[Mephistopheles]

16 minutes ago, TwoCitiesCapital said:

Another week like the last one - and these things will be at the single digit prices I was waiting for. I missed selling the hype on these in 2019. Glad I didn't miss it in 2025. 

 

But I hear an IPO is imminent...

Yes it’s been bad, been buying on way down. Let’s see!

[Castanza]

What's the thought on owning preferred vs common now that the GSEs have been profitable and are well capitalized? A lot has changed since last time I followed this (2020).  

[TwoCitiesCapital]

1 hour ago, Castanza said:

What's the thought on owning preferred vs common now that the GSEs have been profitable and are well capitalized? A lot has changed since last time I followed this (2020).  

 

I still think the preferred are the safer bet with plenty of upside. 

 

I think it'll be difficult to IPO the common without  settling the preferred in some fashion:

 

1) the preferred are the regular reminder the government can, and has, stolen the companies before given that they are owned by the parties who brought most of the lawsuits 

2) must have their dividends turned on before the common

3) not necessarily the best capitalization going forward pending how they prefer to be structured. 

4) providing clarity on what the conversion rate is, if any, from preferred to common in a recap as well as the liquidation preference owed to government 

 

Ackman and Burry both disagree; however, and see further upside to the common. I just don't have the confidence that common don't get wrecked OR that don't preferred don't do well first. 

 

 

 

 

Edited March 20 by TwoCitiesCapital

[Sweet]

On 3/19/2026 at 12:00 AM, TwoCitiesCapital said:

But I hear an IPO is imminent...

Sarcasm?

[Mephistopheles]

The govt doesn’t even need to do an IPO. They don’t even need to do NYSE up listing. All that has to be done is an amendment that reverts the PSPA back to a 10% dividend yield for the senior prefs and no further increase in the liquidation preference. Last time with Mnuchin they stopped the senior preferred dividend all together but then chose to up the liquidation preference with all profits…inexplicable and inexcusable. 

[COBFInfinity]

2 hours ago, Mephistopheles said:

The govt doesn’t even need to do an IPO. They don’t even need to do NYSE up listing. All that has to be done is an amendment that reverts the PSPA back to a 10% dividend yield for the senior prefs and no further increase in the liquidation preference. Last time with Mnuchin they stopped the senior preferred dividend all together but then chose to up the liquidation preference with all profits…inexplicable and inexcusable. 

 

IPO doesn't matter. NYSE up-listing also doesn't matter. What matters is cleaning up the capital structure and outlining the path out of conservatorship. The complete inaction on any front implies that they are just going to run with everything already in place (e.g., capital requirements) as "good enough." That will actually be a positive if they decide they want to move forward - more studies, adjustments, etc. would just slow everything down and likely result in another punt.

 

Side note: Pulte in recent months has on several occasions talked about how smart Trump was not to "sell the GSEs for $100 billion, because now they are worth $500+ billion." Does anyone understand what this even means? There was no threat of a forced sale or anything - Trump/Mnuchin could have set a path out of conservatorship that did not include any immediate sales of the Treasury stake.

[TwoCitiesCapital]

 

6 hours ago, Mephistopheles said:

All that has to be done is an amendment that reverts the PSPA back to a 10% dividend yield for the senior prefs and no further increase in the liquidation preference. 

 

And yet, I'm not sure there is an example in existence of Trump giving up something in exchange for nothing which is what asking him to give up 100% control over 100% of the cash flows for a 10% divvy is doing. Not sure he cares much about a paper gain that can't be monetized on the 80% equity - especially if it means giving up the 100%. 

 

6 hours ago, Mephistopheles said:

 

…inexplicable and inexcusable. 

 

And yet people expect something different out of the same administration this time. 

 

6 hours ago, Sweet said:

Sarcasm?

 

Absolutely. 

 

I think the thing that would change my mind on these is if Don Jr joined the board. Or if Trump disclosed owning the common. Than it would be pretty easy to assume he's acting in his own self interest and enrichment and I'd bet on that continuing. But as of yet, I've heard no disclosures of Trump owning this.

[Mephistopheles]

Love reading stuff like this 

[TwoCitiesCapital]

12 hours ago, Mephistopheles said:

Love reading stuff like this 

 

It's not at all unusual. As a matter of fact, activity like this in crypto, prediction markets, and stocks has been observed since the start of the Trump administration. 

 

The two couldn't possibly be related though! 

 

Just let me know when Fannie Mae/Freddie Mac spike on no news and then we might be onto something. 

[This2ShallPass]

On 3/20/2026 at 6:30 AM, Castanza said:

What's the thought on owning preferred vs common now that the GSEs have been profitable and are well capitalized? A lot has changed since last time I followed this (2020).  

My thought process is simpler. I have 2/3rd common and 1/3rd preferred. Preferreds are getting paid at par in most scenarios. They will cover part of my common cost if they are wiped out. Keeping position size small ~3%.

 

Commons upside is higher. We all know Trump / team don't play by the rules and SC has given the past administrations enough leeway. All it takes is Trump to be convinced by the last person he talks to that the senior preferred should be deemed paid:) You're talking big payday. If the scenarios Ackman talks about play out even partially, then I can get in cheap and own these companies for a long time.

 

[TwoCitiesCapital]

1 hour ago, This2ShallPass said:

All it takes is Trump to be convinced by the last person he talks to that the senior preferred should be deemed paid:) You're talking big payday. 

 

Man, I'll admit, I'm jaded by being in this trade for damn near 15-years. So I try to take my own attitude with a grain of salt. So you should too. 

 

But this is the most hopeful bunch of shareholders I've ever encountered. And is honestly the only reason I'm looking to buy more of the preferred's if they hit single digits of $50 par. 

 

Im beyond thinking that these things get paid, recapped, released, or that justice gets served.

But I'm not beyond making a trade buying  on

despair and banking that another group of hopeful individuals who think the President will just give these things away will come by over time.