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

[rros]

The GSE (Fannie/Freddie) #mortgage model is “wrong, broken, irreparable...it needs to be scrapped.” Per @RepHensarling  speaking @nardotrealtor conference.

 

Chair Hensarling: gse reforms still under consideration in House, but F/F must be wound down and their charters repealed.

 

 

 

Should be interesting to see how this is twisted as bullish

Isn't it this the way politicians seek to increase their leverage for concessions? First order of business, say absolute "no" to everything. Then, scale down. Corker on the tax bill was a no to the bitter end maybe because he asked for the unacceptable: concessions, not granted. A theory.

[Guest cherzeca]

The GSE (Fannie/Freddie) #mortgage model is “wrong, broken, irreparable...it needs to be scrapped.” Per @RepHensarling  speaking @nardotrealtor conference.

 

Chair Hensarling: gse reforms still under consideration in House, but F/F must be wound down and their charters repealed.

 

 

 

Should be interesting to see how this is twisted as bullish

Isn't it this the way politicians seek to increase their leverage for concessions? First order of business, say absolute "no" to everything. Then, scale down. Corker on the tax bill was a no to the bitter end maybe because he asked for the unacceptable: concessions, not granted. A theory.

 

corker didnt concede because he lost leverage when flake flaked out on him and Rs got to 50. he could get nothing so he gave up nothing

[Midas79]

The GSE (Fannie/Freddie) #mortgage model is “wrong, broken, irreparable...it needs to be scrapped.” Per @RepHensarling  speaking @nardotrealtor conference.

 

Chair Hensarling: gse reforms still under consideration in House, but F/F must be wound down and their charters repealed.

 

 

 

Should be interesting to see how this is twisted as bullish

 

To me it's bullish to the extent that it makes Congress less likely to pass a bill before Hensarling and Corker retire. I don't think there's nearly enough "get rid of the GSEs" sentiment in Congress to actually pass something to that effect. I don't trust any legislative reform to be friendly to shareholders.

 

It is also somewhat bullish in that an explicit government guarantee is actually unnecessary in the presence of enough hard equity capital. I don't want an explicit guarantee.

 

Now it would certainly be better if Hensarling was a GSE cheerleader. But I don't think his staunch opposition is a terrible thing.

[locutusoftexas]

The GSE (Fannie/Freddie) #mortgage model is “wrong, broken, irreparable...it needs to be scrapped.” Per @RepHensarling  speaking @nardotrealtor conference.

 

Chair Hensarling: gse reforms still under consideration in House, but F/F must be wound down and their charters repealed.

 

 

 

Should be interesting to see how this is twisted as bullish

 

all of this is like having a board meeting before a newly-installed chairman comes into the room -- while the discussion is interesting, it's merely the prelude.  imo the stopwatch starts whenever tax reform is completed (or fails) and mnuchin / phillips address the elephant in 1h 2018.  mnuchin has already said, recently, he doesn't support shutting down FnF (and phillips mentioned getting them out of conservatorship eventually) -- so we all want to know what does mnuchin want and also is he going to take the lead or follow congress.  in the mean time, we're adrift with buyers sucked in only when prices decline.

 

Forgive me for postulating how various groups are going to think or act, but my take on Congress is that they are basically followers rather than leaders and will therefore wait to see what Treasury (Mnuchin) will propose. Vis a vis Mnuchin, I assume first that he stands for government deregulation (i.e., removing FnF from conservatorship). The fly in the ointment is that the flow of much free money coming from the NWS must be really hard to give up. However, overriding this is that, as a Trump minion, he will wish to stick it to the Democrats and symbolically to Obama. In that case, he would choose to restore FnF to their previous status and meanwhile take the money to be gained by exercising the warrants. Can you imagine Elizabeth Warren if such a restoration were to happen? As I indicated before, I believe that the various investor lawsuits are like higher probability (although still quite unlikely) lottery tickets and will most likely be unsuccessful.

[SnarkyPuppy]

I thought it was determined that any administrative actions by Mnuchin could be blocked by congress?

[rros]

The GSE (Fannie/Freddie) #mortgage model is “wrong, broken, irreparable...it needs to be scrapped.” Per @RepHensarling  speaking @nardotrealtor conference.

 

Chair Hensarling: gse reforms still under consideration in House, but F/F must be wound down and their charters repealed.

 

 

 

Should be interesting to see how this is twisted as bullish

 

all of this is like having a board meeting before a newly-installed chairman comes into the room -- while the discussion is interesting, it's merely the prelude.  imo the stopwatch starts whenever tax reform is completed (or fails) and mnuchin / phillips address the elephant in 1h 2018.  mnuchin has already said, recently, he doesn't support shutting down FnF (and phillips mentioned getting them out of conservatorship eventually) -- so we all want to know what does mnuchin want and also is he going to take the lead or follow congress.  in the mean time, we're adrift with buyers sucked in only when prices decline.

 

Forgive me for postulating how various groups are going to think or act, but my take on Congress is that they are basically followers rather than leaders and will therefore wait to see what Treasury (Mnuchin) will propose. Vis a vis Mnuchin, I assume first that he stands for government deregulation (i.e., removing FnF from conservatorship). The fly in the ointment is that the flow of much free money coming from the NWS must be really hard to give up. However, overriding this is that, as a Trump minion, he will wish to stick it to the Democrats and symbolically to Obama. In that case, he would choose to restore FnF to their previous status and meanwhile take the money to be gained by exercising the warrants. Can you imagine Elizabeth Warren if such a restoration were to happen? As I indicated before, I believe that the various investor lawsuits are like higher probability (although still quite unlikely) lottery tickets and will most likely be unsuccessful.

locus, I welcome your interpretation. As you, I have also believed for a while Trump has an overriding, irrational motivation to stick it to Obama. Although conservatorship is a Bush creation, stealing from FF via the NWS is entirely an obamination.

[Luke 532]

Forgive me for postulating how various groups are going to think or act, but my take on Congress is that they are basically followers rather than leaders and will therefore wait to see what Treasury (Mnuchin) will propose. Vis a vis Mnuchin, I assume first that he stands for government deregulation (i.e., removing FnF from conservatorship). The fly in the ointment is that the flow of much free money coming from the NWS must be really hard to give up. However, overriding this is that, as a Trump minion, he will wish to stick it to the Democrats and symbolically to Obama. In that case, he would choose to restore FnF to their previous status and meanwhile take the money to be gained by exercising the warrants. Can you imagine Elizabeth Warren if such a restoration were to happen? As I indicated before, I believe that the various investor lawsuits are like higher probability (although still quite unlikely) lottery tickets and will most likely be unsuccessful.

 

Keep in mind the warrants that the gov't owns.  They would give up a few billion per quarter by stopping the NWS but would gain a massive amount of cash ($100B+?) almost immediately by the common stock rising and the warrants being sold/exercised/etc.  With a maximum 7-year window for this Administration, perhaps 3-year window, I'd rather have a massive payment up front to use at my disposal.

[Luke 532]

I thought it was determined that any administrative actions by Mnuchin could be blocked by congress?

 

Where did you read that?

 

Any Mnuchin actions could simply be in the format of an Executive Order from Trump.

[Midas79]

I thought it was determined that any administrative actions by Mnuchin could be blocked by congress?

 

"Undone" is a more appropriate word than "blocked." Administrative reform would start immediately upon issuance, while Congress would have to draft a bill, get it through both houses, and then have it signed by Trump to get their way. Ostensibly Trump would approve anything Mnuchin does so then Congress would need a 2/3 majority to override a veto, which is highly unlikely given how hard it has been to get anything passed this term.

[DocSnowball]

Forgive me for postulating how various groups are going to think or act, but my take on Congress is that they are basically followers rather than leaders and will therefore wait to see what Treasury (Mnuchin) will propose. Vis a vis Mnuchin, I assume first that he stands for government deregulation (i.e., removing FnF from conservatorship). The fly in the ointment is that the flow of much free money coming from the NWS must be really hard to give up. However, overriding this is that, as a Trump minion, he will wish to stick it to the Democrats and symbolically to Obama. In that case, he would choose to restore FnF to their previous status and meanwhile take the money to be gained by exercising the warrants. Can you imagine Elizabeth Warren if such a restoration were to happen? As I indicated before, I believe that the various investor lawsuits are like higher probability (although still quite unlikely) lottery tickets and will most likely be unsuccessful.

 

Keep in mind the warrants that the gov't owns.  They would give up a few billion per quarter by stopping the NWS but would gain a massive amount of cash ($100B+?) almost immediately by the common stock rising and the warrants being sold/exercised/etc.  With a maximum 7-year window for this Administration, perhaps 3-year window, I'd rather have a massive payment up front to use at my disposal.

 

And ? use this upfront payment to move forward administrative initiatives needing that 100B to balance the budget to be deficit neutral. Certainly the motives of the administration align with monetizing the warrants.

[investorG]

The GSE (Fannie/Freddie) #mortgage model is “wrong, broken, irreparable...it needs to be scrapped.” Per @RepHensarling  speaking @nardotrealtor conference.

 

Chair Hensarling: gse reforms still under consideration in House, but F/F must be wound down and their charters repealed.

 

 

 

Should be interesting to see how this is twisted as bullish

 

it's bullish because it means HFSC will get nothing done while he is chair or has any influence

 

the House Repubs could latch onto ginnie mae model.  this is where mnuchin's thoughts should come in, whenever he tells us what his goals are.

 

to be clear, if hensarling hates FnF, he hates GNMA even more.  he wants govt out of housing.

 

I encourage everyone to read the text of hensarling's speech today, simply google house financial services committee, it's on the front page.

 

it's not encouraging.  he acknowledges some things he wants but won't get, yet his solutions are not what many on here prefer.

 

Hopefully, Mnuchin fights for a different outcome.  In the end, though, I still think even if FnF are wound down, there are ways to treat public shareholders fairly (given the small market cap), and thus I still believe in the value of the securities at these levels.

 

[investorG]

Hen is a loser. The FNMA market is down by a penny, I would have expected more from Chairman of House Financial Services Committee. A penny here and there , or even two, or even 3 is normal. That means no one cared what he says.

 

it's likely one of the reasons we're at these low levels, his views that we found out today have likely been distributed to industry players in recent weeks

[investorG]

Forgive me for postulating how various groups are going to think or act, but my take on Congress is that they are basically followers rather than leaders and will therefore wait to see what Treasury (Mnuchin) will propose. Vis a vis Mnuchin, I assume first that he stands for government deregulation (i.e., removing FnF from conservatorship). The fly in the ointment is that the flow of much free money coming from the NWS must be really hard to give up. However, overriding this is that, as a Trump minion, he will wish to stick it to the Democrats and symbolically to Obama. In that case, he would choose to restore FnF to their previous status and meanwhile take the money to be gained by exercising the warrants. Can you imagine Elizabeth Warren if such a restoration were to happen? As I indicated before, I believe that the various investor lawsuits are like higher probability (although still quite unlikely) lottery tickets and will most likely be unsuccessful.

 

Keep in mind the warrants that the gov't owns.  They would give up a few billion per quarter by stopping the NWS but would gain a massive amount of cash ($100B+?) almost immediately by the common stock rising and the warrants being sold/exercised/etc.  With a maximum 7-year window for this Administration, perhaps 3-year window, I'd rather have a massive payment up front to use at my disposal.

 

while it's surprising to me, no congressperson has mentioned the warrants to my knowledge.  Thus, I don't think the warrants are driving the process; I doubt Mnuchin would get up and say we need to structure reform in X way to make sure we monetize the warrants.  Rather, they seem like a secondary added benefit of any plan that preserves FnF.

[rros]

Hen is a loser. The FNMA market is down by a penny, I would have expected more from Chairman of House Financial Services Committee. A penny here and there , or even two, or even 3 is normal. That means no one cared what he says.

Probably because of what he said, not what he wrote:

 

House Financial Services Committee Jeb Hensarling shifted tactics on housing finance reform Wednesday, acknowledging that a bill he’s pushed for years to virtually eliminate the government’s role in the mortgage market lacks the support to become law.

 

The Texas Republican also conceded that while he opposes any kind of government guarantee of the mortgage market, it would be impossible to pass a reform effort without one.

 

“While I personally have not changed … my mind that the best path forward remains the PATH Act [Hensarling’s bill], after carefully surveying today’s political landscape, I do not see the PATH Act’s passage likely,” Hensarling said.

 

He also acknowledged that any bipartisan deal would include some support for affordable housing, another area where Hensarling has been previously vigorously opposed.

 

“I also believe the idea (government guarantee) is not going away anytime soon and I fully expect it to be part of any successful reform effort in this Congress.”

 

Briefly, wind down, charter elimination and all-or-nothing approach are out. Gov guarantee, affordable housing goals, multiple layers of private capital -diversified- stacked up before gov guarantee and DeMarco/Bright are in.

 

Also, Heitkamp said “new ideas are percolating up,” including “basically maintaining” Fannie and Freddie. That is one area that Hensarling does not appear ready to compromise. He emphasized Wednesday that any bill should eliminate Fannie and Freddie.

[Midas79]

Hen is a loser. The FNMA market is down by a penny, I would have expected more from Chairman of House Financial Services Committee. A penny here and there , or even two, or even 3 is normal. That means no one cared what he says.

 

it's likely one of the reasons we're at these low levels, his views that we found out today have likely been distributed to industry players in recent weeks

 

The bolded part isn't right. We have known that Hensarling wants to kill the GSEs and get the government completely out of housing finance for a long time. I think this is why the market had little to no reaction: it isn't news.

 

https://hensarling.house.gov/media-center/press-releases/hensarling-re-introduces-legislation-to-end-taxpayer-funded-bailout-of

[investorG]

Hen is a loser. The FNMA market is down by a penny, I would have expected more from Chairman of House Financial Services Committee. A penny here and there , or even two, or even 3 is normal. That means no one cared what he says.

 

it's likely one of the reasons we're at these low levels, his views that we found out today have likely been distributed to industry players in recent weeks

 

The bolded part isn't right. We have known that Hensarling wants to kill the GSEs and get the government completely out of housing finance for a long time. I think this is why the market had little to no reaction: it isn't news.

 

https://hensarling.house.gov/media-center/press-releases/hensarling-re-introduces-legislation-to-end-taxpayer-funded-bailout-of

 

I don't see it the same way, after reading the text of his speech.  he admitted the Path act and no govt guarantee are not viable even though he still supports them.  this is new.  but he reiterated a wind-down of FnF which means even though he's adapted his views, this core element remains unchanged.  as discussed prior, mnuchin is the wild card.  but with such a line-in-the-sand wording, it tells me it's unlikely that gse-investor-friendly legislation passes congress in 2018.  so we're left with 3 options:  wait for 2019 (with maybe democrats in charge), something legislatively in 2018 that isn't great for us, or something purely administrative.   

[Luke 532]

 

It's happening: Senate #GSE reform proposal preserves Fannie and Freddie (in smaller form) and builds on existing system. #housing Only on @POLITICOPro -->https://www.politicopro.com/financial-services/article/2017/12/fannie-and-freddie-would-live-on-under-senate-proposal-211101 …

 

Lorraine‏Verified account @Woellert

31s32 seconds ago

 

You heard it here first-->Some Fannie & Freddie shareholders wiped out when the government took control of the companies eventually could see their stock values return under new Corker-Warner plan. $FNMA $FMCC #mortgage http://politico.pro/2B6NSs5

[SnarkyPuppy]

Does anyone have access to the politico link?

[Guest cherzeca]

 

It's happening: Senate #GSE reform proposal preserves Fannie and Freddie (in smaller form) and builds on existing system. #housing Only on @POLITICOPro -->https://www.politicopro.com/financial-services/article/2017/12/fannie-and-freddie-would-live-on-under-senate-proposal-211101 …

 

Lorraine‏Verified account @Woellert

31s32 seconds ago

 

You heard it here first-->Some Fannie & Freddie shareholders wiped out when the government took control of the companies eventually could see their stock values return under new Corker-Warner plan. $FNMA $FMCC #mortgage http://politico.pro/2B6NSs5

 

so who has politico pro sub and can copy and paste?

[Guest cherzeca]

i'm guessing that "some" GSE shareholders getting value means those who are preNWS shareholders.  if so this wont fly. 

[rros]

i'm guessing that "some" GSE shareholders getting value means those who are preNWS shareholders.  if so this wont fly.

Perhaps this means dilution to common will impede great appreciation while preferreds might see face? But Chris, aren't you pre-2012?

[Guest cherzeca]

i'm guessing that "some" GSE shareholders getting value means those who are preNWS shareholders.  if so this wont fly.

Perhaps this means dilution to common will impede great appreciation while preferreds might see face?

 

this is a purloined copy of a draft bill that likely wont see light of day much less 60 vote passage in senate

[doc75]

i'm guessing that "some" GSE shareholders getting value means those who are preNWS shareholders.  if so this wont fly.

 

Do you say it wouldn't fly on legal grounds?

 

Politically speaking, this seems like the obvious way to go.  Trump made a big deal about "those hedge fund guys".  Whether they were friends in the past or not is immaterial: I think he'd love a solution that buys him the Main Street credibility of denying some of those guys a windfall while still allowing him to raise the finger to the Obama legacy.

 

BUT:  I'm the first to admit I'm completely naive here.

 

 

[Guest cherzeca]

i'm guessing that "some" GSE shareholders getting value means those who are preNWS shareholders.  if so this wont fly.

 

Do you say it wouldn't fly on legal grounds?

 

Politically speaking, this seems like the obvious way to go.  Trump made a big deal about "those hedge fund guys".  Whether they were friends in the past or not is immaterial: I think he'd love a solution that buys him the Main Street credibility of denying some of those guys a windfall while still allowing him to raise the finger to the Obama legacy.

 

BUT:  I'm the first to admit I'm completely naive here.

 

this gets to the greece bonds question.  if congress thinks they can screw shareholders and then raise robust private capital, seems unlikely that wall street will comply...unless investors have short memories and attention spans

[Luke 532]

i'm guessing that "some" GSE shareholders getting value means those who are preNWS shareholders.  if so this wont fly.

 

When did Ackman build his common stake? He was singing the praises of Corker and Warner not long ago.