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

[rros]

R-ship is just a process of wiping the balance sheet clean to recapitalize. Read HERA it is specifically stated that r-ship is to remove claims and then can transfer charters to a new entity and forbids any prior claims from transferring over.

 

Look shareholders lost in court so SCOTUS is last hope. If denied cert why on Earth would they give shareholders anything? Sure we won a tiny claims damage that Lamberth will award .01 cents as damages and be done with it. Berk punted to SCOTUS before discovery was finished... there's no smoking gun in the documents.

 

Unless Perry or Berk gets cert from SCOTUS, the GSEs are going into r-ship to get liquidated of old claims and recapitalized on clean balance sheets. The writing is on the wall unless you believe in some grand lets rescue shareholders scheme.

Explain how Watt can call receivership when there are still 258 billion left in taxpayers backing. You meant forced R instead of mandatory?

You read HERA. Again. R requires very specific and narrow events to be triggered. It is not a free willing tool to be used at will, but of last resort.

[investorG]

R-ship is just a process of wiping the balance sheet clean to recapitalize. Read HERA it is specifically stated that r-ship is to remove claims and then can transfer charters to a new entity and forbids any prior claims from transferring over.

 

Look shareholders lost in court so SCOTUS is last hope. If denied cert why on Earth would they give shareholders anything? Sure we won a tiny claims damage that Lamberth will award .01 cents as damages and be done with it. Berk punted to SCOTUS before discovery was finished... there's no smoking gun in the documents.

 

Unless Perry or Berk gets cert from SCOTUS, the GSEs are going into r-ship to get liquidated of old claims and recapitalized on clean balance sheets. The writing is on the wall unless you believe in some grand lets rescue shareholders scheme.

Explain how Watt can call receivership when there are still 258 billion left in taxpayers backing. You meant forced R instead of mandatory?

 

while possible it would be fairly unprecedented to throw companies making $20bn into receivership, as you well know.  ultimately we're making a bet on mnuchin and trump's desires (among other factors also).  the US deficit is 2bn per day.  the combined market cap of all public FnF securities at current levels is around 12bn. my bet is that mnuchin / trump aren't eager to crush the owners of the GSE securities, many of which are his supporters (icba, Paulson, berkowitz) to save the equivalent of 6 days of deficit.  time will tell.

 

[Fat Pitch]

HERA was passed by Congress which allows the regulator to ignore the Constitution and every judge agrees. But let's forget that. If cert is denied can you explain why would the gov't give anything to shareholders? They basically have a clear and legal path to take everything. Shareholders rolled the dice in court and lost.

 

Hope I am wrong and justice prevails. Everything hinges on Mnuchin.

 

R-ship is just a process of wiping the balance sheet clean to recapitalize. Read HERA it is specifically stated that r-ship is to remove claims and then can transfer charters to a new entity and forbids any prior claims from transferring over.

 

Look shareholders lost in court so SCOTUS is last hope. If denied cert why on Earth would they give shareholders anything? Sure we won a tiny claims damage that Lamberth will award .01 cents as damages and be done with it. Berk punted to SCOTUS before discovery was finished... there's no smoking gun in the documents.

 

Unless Perry or Berk gets cert from SCOTUS, the GSEs are going into r-ship to get liquidated of old claims and recapitalized on clean balance sheets. The writing is on the wall unless you believe in some grand lets rescue shareholders scheme.

Explain how Watt can call receivership when there are still 258 billion left in taxpayers backing. You meant forced R instead of mandatory?

You read HERA. Again. R requires very specific and narrow events to be triggered. It is not a free willing tool to be used at will, but of last resort.

[rros]

HERA was passed by Congress which allows the regulator to ignore the Constitution and every judge agrees. But let's forget that. If cert is denied can you explain why would the gov't give anything to shareholders? They basically have a clear and legal path to take everything. Shareholders rolled the dice in court and lost.

 

Hope I am wrong and justice prevails. Everything hinges on Mnuchin.

 

R-ship is just a process of wiping the balance sheet clean to recapitalize. Read HERA it is specifically stated that r-ship is to remove claims and then can transfer charters to a new entity and forbids any prior claims from transferring over.

 

Look shareholders lost in court so SCOTUS is last hope. If denied cert why on Earth would they give shareholders anything? Sure we won a tiny claims damage that Lamberth will award .01 cents as damages and be done with it. Berk punted to SCOTUS before discovery was finished... there's no smoking gun in the documents.

 

Unless Perry or Berk gets cert from SCOTUS, the GSEs are going into r-ship to get liquidated of old claims and recapitalized on clean balance sheets. The writing is on the wall unless you believe in some grand lets rescue shareholders scheme.

Explain how Watt can call receivership when there are still 258 billion left in taxpayers backing. You meant forced R instead of mandatory?

You read HERA. Again. R requires very specific and narrow events to be triggered. It is not a free willing tool to be used at will, but of last resort.

I am not saying it cannot happen. But they will have to come up with a clever, nws-like argument. HERA, the law, establishes specific events that will trigger receivership and nowhere it states it can be used at will to clean up companies' balance sheet. But then, they have already shown how clever they are. Did it once, they can do it twice. Fuck them, thrice.

[SnarkyPuppy]

HERA was passed by Congress which allows the regulator to ignore the Constitution and every judge agrees. But let's forget that. If cert is denied can you explain why would the gov't give anything to shareholders? They basically have a clear and legal path to take everything. Shareholders rolled the dice in court and lost.

 

Hope I am wrong and justice prevails. Everything hinges on Mnuchin.

 

R-ship is just a process of wiping the balance sheet clean to recapitalize. Read HERA it is specifically stated that r-ship is to remove claims and then can transfer charters to a new entity and forbids any prior claims from transferring over.

 

Look shareholders lost in court so SCOTUS is last hope. If denied cert why on Earth would they give shareholders anything? Sure we won a tiny claims damage that Lamberth will award .01 cents as damages and be done with it. Berk punted to SCOTUS before discovery was finished... there's no smoking gun in the documents.

 

Unless Perry or Berk gets cert from SCOTUS, the GSEs are going into r-ship to get liquidated of old claims and recapitalized on clean balance sheets. The writing is on the wall unless you believe in some grand lets rescue shareholders scheme.

Explain how Watt can call receivership when there are still 258 billion left in taxpayers backing. You meant forced R instead of mandatory?

You read HERA. Again. R requires very specific and narrow events to be triggered. It is not a free willing tool to be used at will, but of last resort.

 

Can you respond to the question posed about incentive alignment?  i.e. Making junior prefs whole is immaterial in the grand scheme of next steps, but wiping them out effectively puts a dagger through trump/mnuchin close supporters, friends, and funding for the next election cycle

[TwoCitiesCapital]

R-ship is just a process of wiping the balance sheet clean to recapitalize. Read HERA it is specifically stated that r-ship is to remove claims and then can transfer charters to a new entity and forbids any prior claims from transferring over.

 

Look shareholders lost in court so SCOTUS is last hope. If denied cert why on Earth would they give shareholders anything? Sure we won a tiny claims damage that Lamberth will award .01 cents as damages and be done with it. Berk punted to SCOTUS before discovery was finished... there's no smoking gun in the documents.

 

Unless Perry or Berk gets cert from SCOTUS, the GSEs are going into r-ship to get liquidated of old claims and recapitalized on clean balance sheets. The writing is on the wall unless you believe in some grand lets rescue shareholders scheme.

Explain how Watt can call receivership when there are still 258 billion left in taxpayers backing. You meant forced R instead of mandatory?

You read HERA. Again. R requires very specific and narrow events to be triggered. It is not a free willing tool to be used at will, but of last resort.

 

While I generally believe this will get worked out in time, let us not forget the very, very, very liberal interpretation of Conservatorship and how a de facto liquidation the companies is being done in the name of preserving and conserving the companies' assets.

 

I don't think it would be THAT difficult to come up with a similar bullshit reading and force receivership.

[merkhet]

Look shareholders lost in court so SCOTUS is last hope. If denied cert why on Earth would they give shareholders anything? Sure we won a tiny claims damage that Lamberth will award .01 cents as damages and be done with it. Berk punted to SCOTUS before discovery was finished... there's no smoking gun in the documents.

 

I keep feeling the need to point out that shareholders won in part and lost in part, which goes against the statement that SCOTUS represents shareholders' last hope. (Also, Jacob & Hindes, etc. that cherzeca pointed out.) Whether the claim for breach of contract will end up being large or small can be debated, but it's mildly important to keep the facts straight here.

 

Also, the case that Fairholme appealed to SCOTUS was in the U.S. Court of Appeals for the D.C. Circuit dealing with the Administrative Procedures Act. It is wholly separate from the case that is being tried before Judge Sweeney's court in the U.S. Court of Federal Claims under a Takings Claim, so it doesn't really matter that discovery is ongoing in the U.S. Court of Federal Claims while Berkowitz et. al. petition for cert based on the APA claims.

[rros]

HERA was passed by Congress which allows the regulator to ignore the Constitution and every judge agrees. But let's forget that. If cert is denied can you explain why would the gov't give anything to shareholders? They basically have a clear and legal path to take everything. Shareholders rolled the dice in court and lost.

 

Hope I am wrong and justice prevails. Everything hinges on Mnuchin.

 

R-ship is just a process of wiping the balance sheet clean to recapitalize. Read HERA it is specifically stated that r-ship is to remove claims and then can transfer charters to a new entity and forbids any prior claims from transferring over.

 

Look shareholders lost in court so SCOTUS is last hope. If denied cert why on Earth would they give shareholders anything? Sure we won a tiny claims damage that Lamberth will award .01 cents as damages and be done with it. Berk punted to SCOTUS before discovery was finished... there's no smoking gun in the documents.

 

Unless Perry or Berk gets cert from SCOTUS, the GSEs are going into r-ship to get liquidated of old claims and recapitalized on clean balance sheets. The writing is on the wall unless you believe in some grand lets rescue shareholders scheme.

Explain how Watt can call receivership when there are still 258 billion left in taxpayers backing. You meant forced R instead of mandatory?

You read HERA. Again. R requires very specific and narrow events to be triggered. It is not a free willing tool to be used at will, but of last resort.

 

Can you respond to the question posed about incentive alignment?  i.e. Making junior prefs whole is immaterial in the grand scheme of next steps, but wiping them out effectively puts a dagger through trump/mnuchin close supporters, friends, and funding for the next election cycle

Not sure who you address this to but I will bite. Speaking of alignments, we should remember the name Robert Mercer. And I am not sure he cares for shareholders or the companies. And I would not put Mercer, Paulson and Berkowitz in the same league. You know who the big bad boy is. I believe TwoCities has a great point and glad to see the legal perspective here, Cherzeca/Merkhet.

[Eye4Valu]

As usual, Cherz, Merkhet and Luke 5:32 provide sensible and reasoned commentary, while the other comments come straight out of left field and are emotional nonsense. There is little chance of a receivership, and scotus is not the final opportunity to address this legally. In my view, the GSEs will be released from government control along the lines of the Moelis plan in due time. If you can't see that, then you can't see the wall or the writing on it. 

[doughishere]

Look shareholders lost in court so SCOTUS is last hope. If denied cert why on Earth would they give shareholders anything? Sure we won a tiny claims damage that Lamberth will award .01 cents as damages and be done with it. Berk punted to SCOTUS before discovery was finished... there's no smoking gun in the documents.

 

I keep feeling the need to point out that shareholders won in part and lost in part, which goes against the statement that SCOTUS represents shareholders' last hope. (Also, Jacob & Hindes, etc. that cherzeca pointed out.) Whether the claim for breach of contract will end up being large or small can be debated, but it's mildly important to keep the facts straight here.

 

Also, the case that Fairholme appealed to SCOTUS was in the U.S. Court of Appeals for the D.C. Circuit dealing with the Administrative Procedures Act. It is wholly separate from the case that is being tried before Judge Sweeney's court in the U.S. Court of Federal Claims under a Takings Claim, so it doesn't really matter that discovery is ongoing in the U.S. Court of Federal Claims while Berkowitz et. al. petition for cert based on the APA claims.

 

can we just go back to trashing corker...that was more fun.

[orthopa]

Look shareholders lost in court so SCOTUS is last hope. If denied cert why on Earth would they give shareholders anything? Sure we won a tiny claims damage that Lamberth will award .01 cents as damages and be done with it. Berk punted to SCOTUS before discovery was finished... there's no smoking gun in the documents.

 

I keep feeling the need to point out that shareholders won in part and lost in part, which goes against the statement that SCOTUS represents shareholders' last hope. (Also, Jacob & Hindes, etc. that cherzeca pointed out.) Whether the claim for breach of contract will end up being large or small can be debated, but it's mildly important to keep the facts straight here.

 

Also, the case that Fairholme appealed to SCOTUS was in the U.S. Court of Appeals for the D.C. Circuit dealing with the Administrative Procedures Act. It is wholly separate from the case that is being tried before Judge Sweeney's court in the U.S. Court of Federal Claims under a Takings Claim, so it doesn't really matter that discovery is ongoing in the U.S. Court of Federal Claims while Berkowitz et. al. petition for cert based on the APA claims.

 

Agreed, regarding court cases how could someone completely forget Sweeneys and Hindes etc.  I think the issue Watt/Mnuchin have to be weary of is any final solution that does not satisfy/quell lawsuits. What kind of a bind is the gov/mnuchin/FHFA in if shareholders win a case in any court and the GSEs have been reformed/restructured/received etc in a way negative to shareholders.  One would think a final solution would include an agreement with shareholders and the big players would could be satisfied are well known.

[SnarkyPuppy]

Look shareholders lost in court so SCOTUS is last hope. If denied cert why on Earth would they give shareholders anything? Sure we won a tiny claims damage that Lamberth will award .01 cents as damages and be done with it. Berk punted to SCOTUS before discovery was finished... there's no smoking gun in the documents.

 

I keep feeling the need to point out that shareholders won in part and lost in part, which goes against the statement that SCOTUS represents shareholders' last hope. (Also, Jacob & Hindes, etc. that cherzeca pointed out.) Whether the claim for breach of contract will end up being large or small can be debated, but it's mildly important to keep the facts straight here.

 

Also, the case that Fairholme appealed to SCOTUS was in the U.S. Court of Appeals for the D.C. Circuit dealing with the Administrative Procedures Act. It is wholly separate from the case that is being tried before Judge Sweeney's court in the U.S. Court of Federal Claims under a Takings Claim, so it doesn't really matter that discovery is ongoing in the U.S. Court of Federal Claims while Berkowitz et. al. petition for cert based on the APA claims.

 

Agreed, regarding court cases how could someone completely forget Sweeneys and Hindes etc.  I think the issue Watt/Mnuchin have to be weary of is any final solution that does not satisfy/quell lawsuits. What kind of a bind is the gov/mnuchin/FHFA in if shareholders win a case in any court and the GSEs have been reformed/restructured/received etc in a way negative to shareholders.  One would think a final solution would include an agreement with shareholders and the big players would could be satisfied are well known.

 

My contention with this argument is that the Trump administration will likely be on its way out / gone by the time any contingency payments need to be made (per the event you just described).  We've seen how incredibly slow these cases move when the government focuses on its ability to delay.

[investorG]

As usual, Cherz, Merkhet and Luke 5:32 provide sensible and reasoned commentary, while the other comments come straight out of left field and are emotional nonsense. There is little chance of a receivership, and scotus is not the final opportunity to address this legally. In my view, the GSEs will be released from government control along the lines of the Moelis plan in due time. If you can't see that, then you can't see the wall or the writing on it.

 

with all due respect there aren't many well followed 400pct near term investment opportunities out there where 'the writing is on the wall.'  someone who is not dumb is waking up every day thinking its a good time to sell the less liquid jr preferreds @ 20pct of par.

[Guest cherzeca]

As usual, Cherz, Merkhet and Luke 5:32 provide sensible and reasoned commentary, while the other comments come straight out of left field and are emotional nonsense. There is little chance of a receivership, and scotus is not the final opportunity to address this legally. In my view, the GSEs will be released from government control along the lines of the Moelis plan in due time. If you can't see that, then you can't see the wall or the writing on it.

 

with all due respect there aren't many well followed 400pct near term investment opportunities out there where 'the writing is on the wall.'  someone who is not dumb is waking up every day thinking its a good time to sell the less liquid jr preferreds @ 20pct of par.

 

this has always been a contrarian investment, and even more so now with court losses. this is an event driven opportunity and not many, even if analyzing in depth, will believe the event will come, or come in the near term.  anything this affected by judges and politicians is anathema to most institutional investors

[investorG]

Zandi, Wallison and the Fellow Travelers suggest options that would allow large banks to loot the government and homeowners and nothing more. These fellows think everyone is a fool and they keep singing their old tune. If I was a congressman, I would ask each of them like " Mr. Zandi, do you get paid even a $1 by banks ".  We know the answer. Then they should be told "Leave and don't come back to testify"

 

Doesn't Zandi work for Moody's that rated MBS falsely? If so, he has guts to come and testify and support MBA proposal?

 

if you remove the extremes of pure recap / release + wallison / PATH act, to me the big debate that mnuchin - phillips will likely drive is either a) competition through multiple guarantors or b) utility model with expanded risk transfers.   

 

 

[Guest cherzeca]

Zandi, Wallison and the Fellow Travelers suggest options that would allow large banks to loot the government and homeowners and nothing more. These fellows think everyone is a fool and they keep singing their old tune. If I was a congressman, I would ask each of them like " Mr. Zandi, do you get paid even a $1 by banks ".  We know the answer. Then they should be told "Leave and don't come back to testify"

 

Doesn't Zandi work for Moody's that rated MBS falsely? If so, he has guts to come and testify and support MBA proposal?

 

if you remove the extremes of pure recap / release + wallison / PATH act, to me the big debate that mnuchin - phillips will likely drive is either a) competition through multiple guarantors or b) utility model with expanded risk transfers. 

 

i generally agree.  i think additional competition is likely but i am hopeful that mnuchin will want FnF to be "fixed" first before introducing additional competition. 

[rros]

Craig Phillips wants Corker in housing finance reform? strange.

 

Who knows what went on between Obama and Corker re housing/Iran. Nobody knows except admin what deals were done behind the scenes. Maybe Trump needs Corker to wrap things up or else he will own any FF issue, good or bad.

[Luke 532]

Craig Phillips wants Corker in housing finance reform? strange.

 

 

Maybe Admin wants Corker's support for tax reform so he's playing nice for the time being.

[investorG]

Craig Phillips wants Corker in housing finance reform? strange.

 

 

Maybe Admin wants Corker's support for tax reform so he's playing nice for the time being.

 

the tim howard / message board / twitter crusade for pure recap and release is being deflated currently.

 

mnuchin has said he wants to work with congress on this in early 2018.  the house is having 3-4 hearings in a very short period of time.  options / consensus seem to be narrowing.  of course corker would be involved if something is done congressionally in 2018, although his power will likely be diluted from before.

 

one interesting thing after last night, the Congress may very well switch to Democratic control in 2019.  This could motivate the House Repubs (banks) to get something middle of the road done in 2018 vs risking getting left out thereafter.

 

I still don't understand why there's so much selling based on the recent news flow.  one thing i'm thinking is that any prospective buyers think they have time to wait and are expecting / avoiding likely negative court results over the very near term.

 

[Luke 532]

https://www.insidemortgagefinance.com/imfnews/1_1230/daily/Treasury-GSE-Plan-Still-a-Work-in-Progress-1000043566-1.html

[rros]

What does it mean with no balance sheet? Does it mean warrants won't be needed? This would not be Moelis plan, right? Would shareholders do okay in this plan?

 

 

"One source who claims to be familiar with Treasury’s thinking on the matter said a consensus is developing around a model where the government-sponsored enterprises re-emerge as “utilities” with little or no balance sheet and a huge emphasis on honing the common securitization platform for different products.

 

But will Congress take the blueprint and develop legislation around it? It remains to be seen  "

 

 

https://www.insidemortgagefinance.com/imfnews/1_1230/daily/Treasury-GSE-Plan-Still-a-Work-in-Progress-1000043566-1.html

A quick glance tells me the purpose is not to return to the shareholder model, so no, not Moelis. It appears no balance sheet may mean the current status where Treasury is the balance sheet. So a utility model with 1 shareholder, Treasury. So much for respecting our rights. Only saving grace would be a quick receivership where they clean up the mess and hopefully we get paid. May not be good for commons. Alternatively, little balance sheet may mean a double dip by Treasury where equity holders are left with 1%-2% of the company and capital continues to be the Treasury commitment. In this scenario, commons will not move. Or even lose value as the potential appreciation disappears.

[Fat Pitch]

They are following HERA. R-ship then transfer charter to another entity and implement whatever they want. Possibly outcome will be a pass through entity where treasury back stops. Only hope is for treasury to call back jr prefs but why bother?

[rros]

They are following HERA. R-ship then transfer charter to another entity and implement whatever they want. Possibly outcome will be a pass through entity where treasury back stops. Only hope is for treasury to call back jr prefs but why bother?

Because there is already a ruling by the Appeals court, now at Lamberth's, protecting specific rights of preferred holders.

[rros]

Treasury's apprehension has always been equity, not the preferred holders. After all, preferred holders do not benefit of any increase in earnings or market share. From the original internal statements made during the first few years of this novel it was clear they were pointing their guns at common equity. Mnuchin, unfortunately, did not arrive to Treasury to impose his views but to absorb Treasury's. We'll see what happens.

[investorG]

the utility model has material promise politically, economically, and for our securities imo.

 

it likely preserves the 2 companies, their shareholders, and infrastructure.

 

it simply regulates the hell out of them, leading to lower earnings than before.

 

no balance sheet simply means the portfolio side of the business is mostly wound down. 

 

if this article is literally true, which is debatable, I believe the common and preferred shares should be far higher today - despite the execution risk and time value - and even higher than that over time.