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

[investorG]

Thursday, January 18, 2018    12:00 PM - 1:30 PM EST

Craig Phillips will discuss the state of financial regulation and housing reform in the Trump Administration.  He will give the Administration’s views on the best path forward.

 

http://www.whfdc.org/index.php?option=com_jevents&task=icalrepeat.detail&evid=42&Itemid=115&year=2018&month=01&day=18&title=financial-regulation-and-housing-reform-in-the-trump-administration-a-public-policy-luncheon-with-craig-phillips-counselor-to-the-secretary-us-department-of-the-treasury&uid=ac32398b1890bc28d64a3c2c708b76e8

 

predictions from the big brains here on this board?

 

i'm guessing at this point he's got to mention more than the standard 'protect taxpayer and 30yr mortgage' line.  but I doubt he goes into deep specifics.  so I expect somewhere in the middle where he touts or refutes some specific concepts like:  explicit govt guarantee, multiple guarantors (i.e. competition), utility model, ginnie mae wrap role, and possibly how the transition to the new system works.  he'll likely reiterate their desire to go through congress.

 

I don't think he'll mention warrants in a positive light; at a minimum it's optically best to put proper policy above warrants as the driver of reform.

 

[investorG]

A copy of Judge Sweeney's scheduling order entered this afternoon is attached to this e-mail message.  Judge Sweeney directs that (a) amended complaints be filed by Feb. 22; (b) motions to dismiss be filed by June 22; © responses be filed by Sept. 20; and (d) the government's reply be filed by Dec. 19.  Judge Sweeney's order also denies without prejudice the government's supplemental motion to dismiss (Doc. 161) that attempted to segregate shareholders based on the dates they acquired their shares.

 

 

question: a big if, but if they move on something legislatively or administratively in 2018, is it viable that the govt wouldn't have to settle lawsuits such as the one above in conjunction with such a move? or theoretically the govt could just act with a legal overhang?

 

i would answer this way:  1) mnuchin is a banker who is used to seeing hair (litigation risk) on transactions...and what you do when you are an experienced banker is remove the hair as/when you do the deal; 2) congress folks are less experienced with large transactions and will not have a clue as to the need to eliminate the hair when they want to do the deal...in fact, congress isnt even aware that GSE reform is a deal, not just a bill.

 

ok, thanks.  if i'm a congressperson, like tom cotton questioned, i'd like to have some conclusion on any large legal compensation overhang before signing off on a deal.  it's wild the courts take so long.

[Guest cherzeca]

Thursday, January 18, 2018    12:00 PM - 1:30 PM EST

Craig Phillips will discuss the state of financial regulation and housing reform in the Trump Administration.  He will give the Administration’s views on the best path forward.

 

http://www.whfdc.org/index.php?option=com_jevents&task=icalrepeat.detail&evid=42&Itemid=115&year=2018&month=01&day=18&title=financial-regulation-and-housing-reform-in-the-trump-administration-a-public-policy-luncheon-with-craig-phillips-counselor-to-the-secretary-us-department-of-the-treasury&uid=ac32398b1890bc28d64a3c2c708b76e8

 

predictions from the big brains here on this board?

 

i'm guessing at this point he's got to mention more than the standard 'protect taxpayer and 30yr mortgage' line.  but I doubt he goes into deep specifics.  so I expect somewhere in the middle where he touts or refutes some specific concepts like:  explicit govt guarantee, multiple guarantors (i.e. competition), utility model, ginnie mae wrap role, and possibly how the transition to the new system works.  he'll likely reiterate their desire to go through congress.

 

I don't think he'll mention warrants in a positive light; at a minimum it's optically best to put proper policy above warrants as the driver of reform.

 

this is a very small potatoes venue and event to make a big beef announcement

[investorG]

Thursday, January 18, 2018    12:00 PM - 1:30 PM EST

Craig Phillips will discuss the state of financial regulation and housing reform in the Trump Administration.  He will give the Administration’s views on the best path forward.

 

http://www.whfdc.org/index.php?option=com_jevents&task=icalrepeat.detail&evid=42&Itemid=115&year=2018&month=01&day=18&title=financial-regulation-and-housing-reform-in-the-trump-administration-a-public-policy-luncheon-with-craig-phillips-counselor-to-the-secretary-us-department-of-the-treasury&uid=ac32398b1890bc28d64a3c2c708b76e8

 

predictions from the big brains here on this board?

 

i'm guessing at this point he's got to mention more than the standard 'protect taxpayer and 30yr mortgage' line.  but I doubt he goes into deep specifics.  so I expect somewhere in the middle where he touts or refutes some specific concepts like:  explicit govt guarantee, multiple guarantors (i.e. competition), utility model, ginnie mae wrap role, and possibly how the transition to the new system works.  he'll likely reiterate their desire to go through congress.

 

I don't think he'll mention warrants in a positive light; at a minimum it's optically best to put proper policy above warrants as the driver of reform.

 

this is a very small potatoes venue and event to make a big beef announcement

 

possible. or it could be done in conjunction with a ft opinion article.

 

craig phillips has had a year to work on this, and it's a subject he knows like the back of his hand.  with tax reform over, they are overdue to spill some beans.  this could well be a material week one way or the other.

[Eye4Valu]

Is he going to mention the shoddy mortgages he sold them while at MS?

[Luke 532]

https://www.bloomberg.com/news/articles/2018-01-17/fannie-freddie-regulator-calls-for-utility-mortgage-guarantors

In a proposal obtained by Bloomberg News, Federal Housing Finance Agency Director Mel Watt wrote that he and agency staff believe the mortgage market should be supported by shareholder-owned utilities with regulated rates of return and an explicit government guarantee of mortgage bonds.

 

[Midas79]

https://www.bloomberg.com/news/articles/2018-01-17/how-author-wolff-got-into-trump-s-white-house-for-tell-all-book

In a proposal obtained by Bloomberg News, Federal Housing Finance Agency Director Mel Watt wrote that he and agency staff believe the mortgage market should be supported by shareholder-owned utilities with regulated rates of return and an explicit government guarantee of mortgage bonds.

 

It appears to be the wrong link. This is the correct one.

 

https://www.bloomberg.com/news/articles/2018-01-17/fannie-freddie-regulator-calls-for-utility-mortgage-guarantors

[TonyG]

sounds similar to berk and tim howard..

[Luke 532]

It appears to be the wrong link. This is the correct one.

 

https://www.bloomberg.com/news/articles/2018-01-17/fannie-freddie-regulator-calls-for-utility-mortgage-guarantors

 

Doh!  My mistake... corrected the original post.  Thank you!

[SnarkyPuppy]

How much more obvious does it need to get outside of literally implementing the plan?

[investorG]

How much more obvious does it need to get outside of literally implementing the plan?

 

ha!

 

if only it was so easy -- watt is a big player on dividends.  not so much on turning them into shareholder owned utilities.

 

still, I am grateful to him for this bold and fair move, at least what was reported in the Bloomberg article, if it's true.

[Luke 532]

How much more obvious does it need to get outside of literally implementing the plan?

 

Interesting timing of Watt's comments given the speech by Craig Phillips tomorrow.  Not expecting much, but wouldn't be surprised if more details emerge.

[Cox022]

Seems like Joe went out of his way to avoid writing the sentence, 'FHFA's regulator wants Fannie and Freddie to become recapitalized and turned into shareholder-owned utilities.'

 

If that sentence was not true, I'm sure he would be quick to point that out. 

 

I'm just speculating for fun.  Joe's work is much better than past coverage by his peers, imo *ducks for cover*.

 

As with everything else, we will just have to wait for source material to know for sure.

 

[Guest cherzeca]

watt is not a banker so he doesnt know how to execute a FnF recapitalization.  my guess is that he will leave that up to mnuchin...who knows that the moelis blueprint makes sense if a recap is where you want to go.  as for the mbs fed guaranty, sure why not sounds great for a fhfa regulator to have a fed backstop.

[SnarkyPuppy]

Wasn't a shareholder owned regulated utility exactly berkowitz proposal?

[Luke 532]

FHFA document attached...

FHFA_Perspectives_on_Housing_Finance_Reform.pdf

[Luke 532]

Calabria earlier today...

With regard to the administration’s position on housing finance and Fannie Mae and Freddie Mac, Calabria insisted he was not announcing anything for the time being, but, “We do want to see our state-owned enterprises move towards liberalization.”

https://www.marketwatch.com/amp/story/guid/3F8481DA-FBCD-11E7-8AB6-ABAEF652B326?__twitter_impression=true

[Guest cherzeca]

i'm waiting for phillips' presentation tomorrow, as it is hard to tell whether watt is seeking to preempt phillips with support or retort.  but fhfa's perspectives are directionally very good for shareholders

[SnarkyPuppy]

i'm waiting for phillips' presentation tomorrow, as it is hard to tell whether watt is seeking to preempt phillips with support or retort.  but fhfa's perspectives are directionally very good for shareholders

 

Agree - but given the clear coordination between FHFA and Treasury with respect to the Q4 buffer I'd infer further coordination.    My opinion is very biased of course.   

 

With that said - “MBA is grateful for the well-informed input provided by the Director and hope that it contributes to momentum for congressional action on reform," said MBA head lobbyist, Bill Kilmer.

But it's possible MBA sees where this is going and accepting reality + a partial win (MBS guarantee).    Consistent with Stevens resignation. 

[Luke 532]

Let the GSEs Pay Us Back Act of 2017

Sponsor: Rep. Capuano, Michael E. [D-MA-7] (Introduced 01/12/2017)

 

Under an existing Preferred Stock Purchase Agreement, net income from the GSEs is directed to Treasury as a dividend but is not counted toward repayment of the GSEs' debt. The bill requires this agreement to be modifie

d such that: (1) the amounts previously borrowed by the GSEs from Treasury shall be treated as a loan, in accordance with specified terms; and (2) payments made under the agreement by the GSEs to Treasury, including payments made prior to the agreement's modification, shall be treated as payments of principal and interest under such loan.

 

https://www.congress.gov/bill/115th-congress/house-bill/491?loclr=cga-bill

 

[Luke 532]

Let the GSEs Pay Us Back Act of 2017

Sponsor: Rep. Capuano, Michael E. [D-MA-7] (Introduced 01/12/2017)

 

Under an existing Preferred Stock Purchase Agreement, net income from the GSEs is directed to Treasury as a dividend but is not counted toward repayment of the GSEs' debt. The bill requires this agreement to be modifie

d such that: (1) the amounts previously borrowed by the GSEs from Treasury shall be treated as a loan, in accordance with specified terms; and (2) payments made under the agreement by the GSEs to Treasury, including payments made prior to the agreement's modification, shall be treated as payments of principal and interest under such loan.

 

https://www.congress.gov/bill/115th-congress/house-bill/491?loclr=cga-bill

 

I know this is from early 2017 but I received an e-mail alert from Congress.gov that read "H.R.491 - Let the GSEs Pay Us Back Act of 2017 (115th Congress) has changes in summaries."

[Midas79]

I think Watt's letter is a good reason to sell and/or stay away from the commons, at least for now.

 

https://www.marketwatch.com/story/as-fannie-and-freddie-reform-talk-heats-up-their-regulator-speaks-up-2018-01-18

 

Mark Zandi, chief economist at Moody’s Analytics and a long-time housing finance watcher who advanced his own proposal in 2016, called it “a good plan both from an economic and political perspective.”

 

We now have supportive quotes from David Stevens and Mark Zandi. The former wants FnF neutered and the latter wants them dead. Each are assuredly biased, but they both like Watt's proposal, leading me to believe they see FnF as being severely weakened by it.

 

Even if commons are not diluted via warrant exercise and equity raises, Fannie and Freddie's earning power could be decreased enough with other market entrants to severely limit the common's long-term upside.

 

 

[Luke 532]

Mark Zandi, chief economist at Moody’s Analytics and a long-time housing finance watcher who advanced his own proposal in 2016, called it “a good plan both from an economic and political perspective.”

 

We now have supportive quotes from David Stevens and Mark Zandi. The former wants FnF neutered and the latter wants them dead. Each are assuredly biased, but they both like Watt's proposal, leading me to believe they see FnF as being severely weakened by it.

 

It's getting increasingly difficult to kill the thesis of the preferred shares.

[investorG]

Mark Zandi, chief economist at Moody’s Analytics and a long-time housing finance watcher who advanced his own proposal in 2016, called it “a good plan both from an economic and political perspective.”

 

We now have supportive quotes from David Stevens and Mark Zandi. The former wants FnF neutered and the latter wants them dead. Each are assuredly biased, but they both like Watt's proposal, leading me to believe they see FnF as being severely weakened by it.

 

It's getting increasingly difficult to kill the thesis of the preferred shares.

 

could get railroaded in about an hour's time.  tim howard said there should be prepared remarks released.  if he's going to say something material, it would be improper not to release something concurrently.

 

[Luke 532]

could get railroaded in about an hour's time.

 

Agree, it's possible.  Just don't know how probable at this point.