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

[rros]

https://www.insidemortgagefinance.com/imfnews/1_1183/daily/-1000042694-1.html#Login

 

September has finally arrived and that means more hearings on the future of Fannie Mae and Freddie Mac, right? Cowen & Co. is predicting at least one, maybe two hearings in the Senate Banking Committee. But the big question, according to analyst Jaret Seiberg, will be whether Federal Housing Finance Agency Director Mel Watt “permits the enterprises in 2018 to drop to a zero capital position or if he permits them to retain a small share of their profits to build a $1 billion buffer. Also possible is moving to an end-of-year payment to Treasury rather than a quarterly payment. This would smooth out any accounting generated losses that might otherwise precipitate a draw on the preferred capital line.” Stay tuned…

my baseline, which could be misguided, is that the collective goal of mnuchin-watt is a stall until early 2018 without upsetting anyone.  under that lens, the tip-toeing around an obviously reasonable move (creating a buffer) makes sense to me at the moment (even though it's frustrating to wait).  ditto on TSY-FHFA still fighting the lawsuits.  we also need to get past the point where FNMA has repaid the full sr preferred with interest, which I believe is close but not there yet.  However I will say that under my scenario, the share prices would naturally be higher than they are now due to eager anticipation, so maybe I'm wrong.  either way, let's all cross our fingers for a well oiled tax reform process that concludes by year end.  good luck everyone, and have a nice holiday weekend.

A buffer will perpetuate the nws. It will become an eternal buffer. Whereas retaining ALL money in the companies' coffers might be a prelude to keeping that money forever. Trump is more likely to rescind the Sr. shares if they aren't producing immediate money. Why wait a year? Might as well nuke them and cash the warrants. A small buffer, instead, will continue the drainage and who knows what goes on Trump's mind in that regard.

 

As for Congress, I am starting to have this weird feeling that not one law man wants any Trump law ever. So delivering a bill to his desk might be a rare event for the next 4 years. Just a crazy, horrible thought.

[investorG]

add immigration reform to budget, debt ceiling, taxes, infrastructure, and healthcare that Congress will likely address before housing.   

[Midas79]

add immigration reform to budget, debt ceiling, taxes, infrastructure, and healthcare that Congress will likely address before housing. 

 

With today's 419-3 House vote it looks like the debt ceiling issue has been pushed off for "several month(s)" according to this article.

 

http://www.zerohedge.com/news/2017-09-06/house-approves-8-billion-harvey-hurricane-relief-aid

 

Hopefully it's long enough that our hoped-for administrative solution can take place in early 2018 before any debt ceiling issues are back on the table.

[Luke 532]

Tomorrow @stevenmnuchin1 will talk #TaxReform & leveling the playing field for American job creators on @MorningsMaria Tune in @7:30 am ET!

[investorG]

Tomorrow @stevenmnuchin1 will talk #TaxReform & leveling the playing field for American job creators on @MorningsMaria Tune in @7:30 am ET!

 

yesterday's trump-schumer deal was likely a positive.  first, it was a start on working with (gse-friendly) democrats.  second, it likely clears valuable congressional time for tax reform.  nothing good is potentially happening on gse reform until taxes are addressed.

[Luke 532]

yesterday's trump-schumer deal was likely a positive.  first, it was a start on working with (gse-friendly) democrats.  second, it likely clears valuable congressional time for tax reform.  nothing good is potentially happening on gse reform until taxes are addressed.

 

Ryan has said tax reform is the top priority this Fall.  Mnuchin reiterated it is the top priority this morning in his interview with Maria Bartiromo.  It's shaping up to hopefully get done soon.

[Luke 532]

By Paul Muolo

pmuolo@imfpubs.com

Industry officials contend that the folks at Treasury namely Secretary Steven Mnuchin and Senior Counselor Craig Phillips are paying a great deal of attention to the future of Fannie Mae and Freddie Mac these days. Both gentlemen are meeting with trade group officials on a regular basis, discussing the topic. As for when a blueprint might appear, thats a different matter. In case youre wondering, the concept of GSE recap and release is not under consideration. For more on the story, see Inside Mortgage Finance late next week

One thing Treasury is supposedly looking at is how much capital it takes to be a guarantor of conventional MBS. One figure thats been thrown around is $200 billion

[Guest cherzeca]

By Paul Muolo

pmuolo@imfpubs.com

Industry officials contend that the folks at Treasury – namely Secretary Steven Mnuchin and Senior Counselor Craig Phillips – are paying a great deal of attention to the future of Fannie Mae and Freddie Mac these days. Both gentlemen are meeting with trade group officials on a regular basis, discussing the topic. As for when a blueprint might appear, that’s a different matter. In case you’re wondering, the concept of GSE “recap and release” is not under consideration. For more on the story, see Inside Mortgage Finance late next week…

One thing Treasury is supposedly looking at is how much capital it takes to be a guarantor of conventional MBS. One figure that’s been thrown around is $200 billion…

 

seems to me that this is fake news. 

[Luke 532]

seems to me that this is fake news.

 

How do you mean?

[Guest cherzeca]

hearsay. anonymous sources. guy is winging it, just like cnn

[waynepolsonAtoZ]

Gary Cohn was (reportedly) annoyed with Phillips taking to people about GSE reform. He's less popular now with The Donald. Not that recap and release is going to happen any time soon.

[SnarkyPuppy]

hearsay. anonymous sources. guy is winging it, just like cnn

 

CNN specifically.  Nobody else.  lol.

[Guest cherzeca]

what does recap and release mean anyway?  and whenever a "reporter" says that treasury was "supposedly" throwing around some number, then you know the supposed report is worthless

[investorG]

By Paul Muolo

pmuolo@imfpubs.com

Industry officials contend that the folks at Treasury – namely Secretary Steven Mnuchin and Senior Counselor Craig Phillips – are paying a great deal of attention to the future of Fannie Mae and Freddie Mac these days. Both gentlemen are meeting with trade group officials on a regular basis, discussing the topic. As for when a blueprint might appear, that’s a different matter. In case you’re wondering, the concept of GSE “recap and release” is not under consideration. For more on the story, see Inside Mortgage Finance late next week…

One thing Treasury is supposedly looking at is how much capital it takes to be a guarantor of conventional MBS. One figure that’s been thrown around is $200 billion…

 

seems to me that this is fake news.

 

while I don't know the accuracy of the news, it's safe to say that they have not tipped their hand in any fashion towards honoring the rights of shareholders during conversations with industry participants -- because if they did, the share prices would be materially higher than current.  our hope is that this is a strategic move to avoid noise at the current time.

 

my thesis remains that someone with power, whether judge or politician, will stand up and act in the American way by -- at a minimum -- compensating the minority shareholders for their role in providing the companies' time to pay back the loans and interest while avoiding consolidating the $5trn debt on the federal govt's balance sheet.

 

good luck everyone, and I hope you all have a great and safe weekend.

[investorG]

yesterday's trump-schumer deal was likely a positive.  first, it was a start on working with (gse-friendly) democrats.  second, it likely clears valuable congressional time for tax reform.  nothing good is potentially happening on gse reform until taxes are addressed.

 

Ryan has said tax reform is the top priority this Fall.  Mnuchin reiterated it is the top priority this morning in his interview with Maria Bartiromo.  It's shaping up to hopefully get done soon.

 

hopefully it does in the next few months but it won't be easy. 

 

[waynepolsonAtoZ]

I'm leaning to casting Cohn as the villain as he was said to be upset that Phillips was talking to people about GSE stuff. He's said to be unpopular with The Donald now.

[Midas79]

http://bankrupt.com/misc/15-00708-0075.pdf

 

From the Jacobs/Hindes motion to strike brief filed yesterday, footnote 4 at the bottom of page 7:

 

Plaintiffs met and conferred with Defendants pursuant to Local Rule 7.1.1 before filing this

motion.  Plaintiffs and Defendants could not reach agreement on the relief sought.

 

This makes it seems that they discussed a settlement and couldn't agree on terms. Is this the first indication that the government might be willing to settle (relatively soon?) and not just delay and fight to the bitter end?

[Luke 532]

http://bankrupt.com/misc/15-00708-0075.pdf

 

From the Jacobs/Hindes motion to strike brief filed yesterday, footnote 4 at the bottom of page 7:

 

Plaintiffs met and conferred with Defendants pursuant to Local Rule 7.1.1 before filing this

motion.  Plaintiffs and Defendants could not reach agreement on the relief sought.

 

This makes it seems that they discussed a settlement and couldn't agree on terms. Is this the first indication that the government might be willing to settle (relatively soon?) and not just delay and fight to the bitter end?

 

If they are again discussing settlement it would not be the first time the government showed it was willing to settle...

 

Again, I know I sound like a broken tape at this point, but with the scathing Sweeney order to unseal the seven documents, the pending motion to compel in front of Sweeney, the pending Perry decision & the fact that they, stupidly, tried to consolidate cases through the MDL in DC without waiting to see who the judges were in DC... I can't imagine that the government isn't looking at a settlement.

 

+1.  Add to it that the gov't asked for terms awhile back, Sherrod Brown's comments, Berkowitz's comments, Political Alpha's piece as reported by Politico, etc...

 

Sherrod Brown/Bruce Berkowitz comments:

Brown 12/18/2015...

https://www.congress.gov/congressional-record/2015/12/18/senate-section

Mr. BROWN. I will say to my colleague from New York that it does not.

That is not the effect of the language. Any number of decisions could

be made after that date, when a new Congress and a new President will be in place. Nor does this provision have any effect on the court cases and settlements currently underway challenging the validity of the third amendment. As the Senator from Tennessee said yesterday, "this legislation does not prejudice'' any of those cases.

Berkowitz 2/23/2016

At 33-minute mark of the call: https://engage.vevent.com/index.jsp?eid=4711&seid=18

 

"In late 2015 there were settlement communications between plaintiffs and the government.  But frankly, given how deep treasury has dug in its heels and has tried to hide the truth by withholding evidence, it remains unclear to me whether treasury is capable of having an earnest conversation."

 

Gov't asking for terms:

Jon Prior (Politico) tweet on 2/24/2016:

"Treasury, DOJ made no offer last fall, asked for terms."

 

Political Alpha as reported by Politico 4/2/2016:

http://www.politico.com/tipsheets/morning-money

IS WALL STREET SLEEPING ON GSE REFORM? — Via Political Alpha: “While the 10/19/15 coordinated policy response by the White House and Treasury to our 10/5/15 note, ‘White House Looking into Ending GSE Conservatorship,’ had supposedly put the issue over rebuilding capital at the GSEs to bed, contacts tell us that the debate is still very much alive and ongoing inside the Obama Administration.

 

“Moreover, the discussions have moved to Federal Housing Finance Authority (FHFA), which has the authority to act unilaterally and is now actively reviewing its options and likely to act much sooner than Wall Street is expecting to begin the next major housing reform initiative: rebuilding capital at the GSEs.”

[Midas79]

If they are again discussing settlement it would not be the first time the government showed it was willing to settle...

 

Thanks for finding that. I was pretty sure it was my memory that was at fault rather than this being an important break.

 

All of those settlement talks were with the previous administration, though. 17 months is a long time since the last mention of settlement in April 2016. It makes me wonder if talks were delayed while Trump got his staff in place, and if the talks proceeded beyond each side demanding the moon and not budging.

[hardincap]

hamish hume addressed this, and said settlement wont come w/o policy decisions on what to do with GSEs, which makes sense. given that there hasnt been any decisions yet on policy, settlement remains a fantasy

[merkhet]

I think people are reading into the footnote. Rule 7.1.1 requires that the parties meet and confer on non-dispositive motions prior to submitting them before the court.

 

While it's possible that they discussed settlement of the broader issues at the meeting, it's far more likely that they merely discussed figuring out the specific issues concerning this motion at the meeting. And it is not necessarily indicative of an expression of interest in settling.

[Guest cherzeca]

I think people are reading into the footnote. Rule 7.1.1 requires that the parties meet and confer on non-dispositive motions prior to submitting them before the court.

 

While it's possible that they discussed settlement of the broader issues at the meeting, it's far more likely that they merely discussed figuring out the specific issues concerning this motion at the meeting. And it is not necessarily indicative of an expression of interest in settling.

 

merkhet is right.  plaintiffs dont want defendants to make these factual arguments.  they met and conferred and defendants stated that their factual arguments would not be retracted.  hence, this plaintiff motion for judicial notice that the factual arguments are wrong.

 

"Notwithstanding that Defendants’ argument cited above is belied by the

contemporaneous documents, Defendants’ argument is not tied to the factual allegations of

Plaintiffs’ First Amended Complaint. Rather, Defendants’ argument is meant to provide a new

factual justification for the Net Worth Sweep, untethered to any allegations in the First Amended

Complaint, without addressing Plaintiffs’ valid claims that the Net Worth Sweep violates

Delaware and Virginia law. Accordingly, Defendants’ factual arguments are not relevant to the

pending motions to dismiss. Defendants, however, indicated at the meet and confer on this

motion that they will continue to rely on these arguments going forward.4

For the reasons stated

herein, the Court should take judicial notice of the newly released documents which belie the

arguments made in Defendants’ briefs or strike such arguments. "

[Midas79]

I think people are reading into the footnote. Rule 7.1.1 requires that the parties meet and confer on non-dispositive motions prior to submitting them before the court.

 

While it's possible that they discussed settlement of the broader issues at the meeting, it's far more likely that they merely discussed figuring out the specific issues concerning this motion at the meeting. And it is not necessarily indicative of an expression of interest in settling.

 

Thank you for the clarification. I am not surprised to find out that I was reading too much into it.

 

merkhet is right.  plaintiffs dont want defendants to make these factual arguments.  they met and conferred and defendants stated that their factual arguments would not be retracted.  hence, this plaintiff motion for judicial notice that the factual arguments are wrong.

 

This is also not surprising. Defendants retracting their factual arguments would undermine their defense in the other cases as well.

[rros]

http://www.mpamag.com/market-update/new-policy-team-for-next-phase-of-housing-finance-reform-78531.aspx

 

I do not like this news. The fact that these names are assembling a new team to deal with housing reform does not bode well. Unless Mnuchin is firm in his belief that any recapitalization should precede reform. In which case release may still not happen but equity might have a better chance to survive intact. Whatever any reform may look like.

 

I still was disappointed that so late in the game we hear again from names that are hostile to shareholders. How the fuck these people survive, then even thrive?

 

May be not so late in the game? MI would not put this team together if they didn't believe they have a chance to push forward a proposal.

[investorG]

http://www.mpamag.com/market-update/new-policy-team-for-next-phase-of-housing-finance-reform-78531.aspx

 

I do not like this news. The fact that these names are assembling a new team to deal with housing reform does not bode well. Unless Mnuchin is firm in his belief that any recapitalization should precede reform. In which case release may still not happen but equity might have a better chance to survive intact. Whatever any reform looks like.

 

I still was disappointed that so late in the game we hear again from names that are hostile to shareholders. How the fuck these people survive, then even thrive?

 

May be not so late in the game? MI would not put this team together if they didn't believe they have a chance to push forward a proposal.

 

I agree in general but it's a big market with lots of $ involved obviously, so it makes sense big teams are formed.  I am not sure what mnuchin's specific plans are but I expect him, at the right time, to push hard for his goals.