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

[Midas79]

Fannie explains this in their last filing. They don't have latitude. The filings say the loss will be recorded the same quarter the legislation gets enacted. I also wonder if a more dramatic maneuver represents receivership. Fannie explains that without a draw from Treasury's funds, receivership becomes mandatory. Both companies, of course, have 258 billion at their disposal so that risk seems non-existent.

 

Thanks for finding that. It is pretty clear.

 

I highly doubt Mnuchin wants receivership. He just said that he would not go so far as to eliminate the GSEs completely and receivership would cause a huge hiccup (at best) in the 30-year fixed mortgage market which goes against Mnuchin's wishes to maintain liquidity.

 

I also don't think Mnuchin can force receivership, even if the companies' net worth is negative. From section 2.2 of the original SPSPA (I don't believe this was ever amended):

 

2.2.

Quarterly Draws on Commitment

.  Within fifteen (15) Business Days following the determination of the Deficiency Amount, if any, as of the end of each fiscal quarter of Seller which ends on or before the Liquidation End Date, the Designated Representative may, on behalf of Seller, request that Purchaser provide immediately available funds to Seller in an amount up to but not in excess of the Available Amount as of the end of such quarter.  Any such request shall be valid only if it is in writing, is timely made, specifies the account of Seller to which such funds are to be transferred, and contains a certification of the Designated Representative that the requested amount does not exceed the Available Amount as of the end of the applicable quarter.  Purchaser shall provide such funds within sixty (60) days of its receipt of such request or, following any determination by the Director that the Director will be mandated by law to appoint a receiver for Seller if such funds are not received sooner, such shorter period as may be necessary to avoid such mandatory appointment of a receiver if reasonably practicable taking into consideration Purchaser’s access to funds.

 

All Watt has to do is request enough money to keep the companies' net worth above zero in a timely fashion. I don't know if Watt can trigger receivership voluntarily in a negative net worth scenario, but I don't think he would do it for the same reasons Mnuchin wouldn't want it.

[Midas79]

How many lawsuits are pending with FHFA, Fannie, and/or Freddie looking for relief due to bad loans and such? The RBS/Freddie settlement is the most recent one to conclude that I know of.

 

If there is still significant money to be made, I could see the administration wanting to keep the NWS money flowing so that private shareholders don't gain from any settlements or lawsuit victories.

[Luke 532]

There is no volume on preferreds. Everyone is holding. FNMAS and FMCKJ have some volume which you will expect. This is all positive news for a resolution.

 

https://finance.yahoo.com/quotes/fmcc,fnma,fmckj,fmcki,fmccm,fmcck,fmcct,fmcci,fmckk,fmccg,fmcch,fmccl,fmccn,fmcco,fmccp,fmccj,fregp,fmckp,fmccs,fmcko,fmckm,fmckn,fmckl,fnmap,fnmao,fnmfo,fnmam,fnmag,fnman,fnmal,fnmak,fnmah,fnmai,fnmaj,fnmas,fnmat,fnmfm,fnmfn/view/v1?bypass=true&ltr=1

 

Whether there is no volume on a given day or some volume has ZERO bearing on any kind of resolution, positive or negative.

[onyx1]

Anyone else suspect that Corker is behind the 2019 corporate tax cut start date?

 

The one-year delay would avoid a DTA-triggered draw and an FHFA excuse to tinker with the NWS.

 

All to give Corker time to work out a legislative "solution".

[SnarkyPuppy]

Nobody else is skeptical of the corker plan hinted at by ackman?  Implies that corker implements legislation which benefits trump (aligns to what Mnuchin wants, ergo what trump wants) after having a public battle against trump.  Makes no sense. 

 

Unless-

- corker cares more about $ and they've developed a plan which is win/win for bank lobbyists and shareholders

- or, ackman doesn't have insight into the plan, but simply knows that Mnuchin is supporting corker and is implying that Mnuchin is shareholder friendly

[rros]

Anyone else suspect that Corker is behind the 2019 corporate tax cut start date?

 

The one-year delay would avoid a DTA-triggered draw and an FHFA excuse to tinker with the NWS.

 

All to give Corker time to work out a legislative "solution".

Possibly, since Mnuchin/WH ok this. Sounds like talks behind the scene. But then, maybe Mnuchin also ok's whatever Corker's new bill might be and is inline with 30Y and taxpayers' protection.

[Midas79]

Anyone else suspect that Corker is behind the 2019 corporate tax cut start date?

 

The one-year delay would avoid a DTA-triggered draw and an FHFA excuse to tinker with the NWS.

 

All to give Corker time to work out a legislative "solution".

 

I doubt it. Reducing the headline corporate tax rate is the R's signature tax reform objective; delaying it for a year for such a relatively trivial reason (to most Senators) would make it harder to get the R votes needed.

 

At one point Corker had tried to taunt Watt into taking a draw for no reason at all. One would think Corker would try to increase the probability of a draw and have it be sooner rather than later.

[onyx1]

Anyone else suspect that Corker is behind the 2019 corporate tax cut start date?

 

The one-year delay would avoid a DTA-triggered draw and an FHFA excuse to tinker with the NWS.

 

All to give Corker time to work out a legislative "solution".

 

I doubt it. Reducing the headline corporate tax rate is the R's signature tax reform objective; delaying it for a year for such a relatively trivial reason (to most Senators) would make it harder to get the R votes needed.

 

At one point Corker had tried to taunt Watt into taking a draw for no reason at all. One would think Corker would try to increase the probability of a draw and have it be sooner rather than later.

 

 

I'm speculating that its not trivial to Corker, and with such a thin majority, Corker may be in a position successfully demand 2019 or he votes no.

[Midas79]

Anyone else suspect that Corker is behind the 2019 corporate tax cut start date?

 

The one-year delay would avoid a DTA-triggered draw and an FHFA excuse to tinker with the NWS.

 

All to give Corker time to work out a legislative "solution".

 

I doubt it. Reducing the headline corporate tax rate is the R's signature tax reform objective; delaying it for a year for such a relatively trivial reason (to most Senators) would make it harder to get the R votes needed.

 

At one point Corker had tried to taunt Watt into taking a draw for no reason at all. One would think Corker would try to increase the probability of a draw and have it be sooner rather than later.

 

 

I'm speculating that its not trivial to Corker, and with such a thin majority, Corker may be in a position successfully demand 2019 or he votes no.

 

But if the FnF DTA issue was the only reason he wants the delay he could just try to insert special language just for the GSEs. Something like keeping their tax rate at 35% while in conservatorship. I don't think that would trigger a write-down because FnF don't know when the conservatorship will end and thus wouldn't know how much to write down? It could also be seen as a show of good faith towards Mnuchin, even though it certainly wouldn't be one in reality.

 

The one-year delay also might be enough of a dealbreaker to some Senate Rs that Corker would end up cutting off his own nose to spite his face. If the tax reform bill goes down because of him he might get a ton of blame from Rs (especially Trump) and might lose some political capital for his last year in office.

 

From the (admittedly little) reading I've done, there is a Senate rule that allows them to pass the tax reform with a simple 51-vote majority as long as it is not projected to increase the deficit by more than $1.5T over 10 years, and that the one-year delay in cutting the corporate tax rate is designed to "save" money that will be used for other tax cuts. That seems more plausible to me than a one-man crusade on Corker's part.

 

You're right that Corker holds a lot of power even though he has but one vote due to the R's slim majority in the Senate.

[onyx1]

Anyone else suspect that Corker is behind the 2019 corporate tax cut start date?

 

The one-year delay would avoid a DTA-triggered draw and an FHFA excuse to tinker with the NWS.

 

All to give Corker time to work out a legislative "solution".

 

I doubt it. Reducing the headline corporate tax rate is the R's signature tax reform objective; delaying it for a year for such a relatively trivial reason (to most Senators) would make it harder to get the R votes needed.

 

At one point Corker had tried to taunt Watt into taking a draw for no reason at all. One would think Corker would try to increase the probability of a draw and have it be sooner rather than later.

 

 

I'm speculating that its not trivial to Corker, and with such a thin majority, Corker may be in a position successfully demand 2019 or he votes no.

 

But if the FnF DTA issue was the only reason he wants the delay he could just try to insert special language just for the GSEs. Something like keeping their tax rate at 35% while in conservatorship. I don't think that would trigger a write-down because FnF don't know when the conservatorship will end and thus wouldn't know how much to write down? It could also be seen as a show of good faith towards Mnuchin, even though it certainly wouldn't be one in reality.

 

The one-year delay also might be enough of a dealbreaker to some Senate Rs that Corker would end up cutting off his own nose to spite his face. If the tax reform bill goes down because of him he might get a ton of blame from Rs (especially Trump) and might lose some political capital for his last year in office.

 

From the (admittedly little) reading I've done, there is a Senate rule that allows them to pass the tax reform with a simple 51-vote majority as long as it is not projected to increase the deficit by more than $1.5T over 10 years, and that the one-year delay in cutting the corporate tax rate is designed to "save" money that will be used for other tax cuts. That seems more plausible to me than a one-man crusade on Corker's part.

 

You're right that Corker holds a lot of power even though he has but one vote due to the R's slim majority in the Senate.

 

 

Good points, you may be right.  It's very hard to tell sitting here in the cheap seats.

 

 

 

 

[investorG]

Anyone else suspect that Corker is behind the 2019 corporate tax cut start date?

 

The one-year delay would avoid a DTA-triggered draw and an FHFA excuse to tinker with the NWS.

 

All to give Corker time to work out a legislative "solution".

 

highly unlikely.

 

mnuchin, if he stays strong, has leverage to get most of what he prefers because it's likely the congress flips democratic in 2019 -- the bank cartel should root for action in 2018 even if it's not their best case outcome.  because if not it will be mnuchin, Maxine waters, Capuano, Sherrod brown, Sherman, etc in the lead in 2019.

 

[rros]

Corker is busy cooking something. He knows his leverage in this tax reform vote count but he also knows that his dirty games have been exposed. I read that the tax bill may have support from some democrats, so Corker will lose leverage.

 

Anyone else suspect that Corker is behind the 2019 corporate tax cut start date?

 

The one-year delay would avoid a DTA-triggered draw and an FHFA excuse to tinker with the NWS.

 

All to give Corker time to work out a legislative "solution".

This guy believes sausage will be ready before year's end with the 20% corporate tax enchilada in it. No correction in sight according to permabull Wesbury. He's been correct (as well as Paulsen) since 2008 and called the bottom on March 09' after Congress reversed mark-to-market rules in Feb 09'.

http://www.ftportfolios.com/Commentary/EconomicResearch/2017/11/17/the-sausage-making-factory-and-tax-cuts

[SnarkyPuppy]

All signs pointing to explicit MBS guarantee as one of the principles that will be released.   

[orthopa]

All signs pointing to explicit MBS guarantee as one of the principles that will be released. 

 

Both Moelis and MBA plans want explicit guarantee right? If so doesn't tell us too much yet.

[Guest cherzeca]

All signs pointing to explicit MBS guarantee as one of the principles that will be released. 

 

Both Moelis and MBA plans want explicit guarantee right? If so doesn't tell us too much yet.

 

Moelis doesn’t call for mbs guaranty just a preservation of the line of credit TO THE GSES until capital rebuilt

[Guest cherzeca]

All signs pointing to explicit MBS guarantee as one of the principles that will be released. 

 

This is entirely misleading. If first dollar guarantee then has to go as federal debt towards ceiling. If there is private capital to absorb losses then how subordinated is federal guarantee?  Mnuchin principles contra federal payouts again. I think this is just all MBA smokescreen for now.

[Guest cherzeca]

All signs pointing to explicit MBS guarantee as one of the principles that will be released. 

 

This is entirely misleading. If first dollar guarantee then has to go as federal debt towards ceiling. If there is private capital to absorb losses then how subordinated is federal guarantee?  Mnuchin principles contra federal payouts again. I think this is just all MBA smokescreen for now.

 

for example you could have a pool of securitized mortgages with the senior, say, 25% are mbs guaranteed by feds and bottom 75% guaranteed by GSEs.  that way in event of defaults, the pool would have to experience 75% default (with holders getting paid by GSEs) before treasury pays any on the senior tranche.  that 25% mbs layer would still have to count against the debt ceiling imo.  banks could hold the top 25% mbs and have a free ride on their regulatory capital, and slightly less risk adverse investors could hold the bottom 75%.  both guarantees would be explicit and paid for.  imo opinion, this might make some sense...and this is a far cry from what the MBA has been proposing.  this scenario would be consistent with what the rags are smokescreening, so you cant get too worked up about these detail-less leaks.

[SnarkyPuppy]

Right- it doesn't give insight to any specific structure. 

 

"Craig Phillips, a top adviser to Mnuchin, told credit union executives in September that “we think the right approach is to consider an explicit, paid-for, full-faith and -credit guarantee for federally sponsored mortgage-backed securities with added protections on the front of that guarantee to make it really usable when you are in very exigent circumstances.” "

[Guest cherzeca]

if i am right and the treasury guaranty has to be included in the federal debt ceiling test, then you will have a crazy situation where the federal guaranty may have to be suspended for new issuances when (not if) there is a congressional impasse on raising ceiling

[investorG]

wow, 20pct drawdown in a couple weeks.  it appears someone knows something that we don't. 

[hardincap]

wow, 20pct drawdown in a couple weeks.  it appears someone knows something that we don't.

 

on abnormally high volume, so either someone knows something or a fund is liquidating, or both

[investorG]

wow, 20pct drawdown in a couple weeks.  it appears someone knows something that we don't.

 

on abnormally high volume, so either someone knows something or a fund is liquidating, or both

 

my hope is that berkowitz's 400mm hedge fund, which was distributed to LPs last month, was loaded with these, and the end holders are bailing.

 

my reality sensor tells me that its more than that, and we'll find out why soon enough.

 

[Luke 532]

wow, 20pct drawdown in a couple weeks.  it appears someone knows something that we don't.

 

on abnormally high volume, so either someone knows something or a fund is liquidating, or both

 

On FNMAS, is a shade over 1 million shares (1.143M) average daily for last 11 trading days (not including today) really all that abnormal?

[hardincap]

@luke, im seeing 2.5m volume nov 16,17,18.

 

iirc, there was similar spike in volume and fall in share price just prior to lamberth

[Luke 532]

On FNMAS, is a shade over 1 million shares (1.143M) average daily for last 11 trading days (not including today) really all that abnormal?

 

Volume was actually higher from September 1 - November 2 average 1.172M shares.

 

Even removing the largest single day of trading (8.648M Oct 18th), the average is still 998K shares.