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

[rros]

so the rumor is that a close business associate of Mnuchin is to be acting director and a guy who co-wrote a scathing indictment of the NWS (https://www.dropbox.com/s/sb8h3cgub74u9c6/Krimminger-Calabria-HERA-White-Paper-Jan-29.pdf?dl=0) is to be nominated as director (subject to consent by a R majority...and likely will be given a non-confirmation job at FHFA before confirmation).

 

why isn't MBA raging against this?

Which makes you wonder, are Otting/Calabria really good news for us?

[Guest cherzeca]

could be MBA's definition of a "win" has become saddle GSEs with a high capital requirement, which should raise G fees which should mean more underwriting profit for tbtf on mortgages tbtf originate.  the whole GSE wind down and tbtf inherit the business idea may be gone with the wind (and corker and Hensarling)

[allnatural]

More notably, Otting is known for being the restructuring guy during his time at OneWest... Wonder what the GSEs are about to go through?

[Mephistopheles]

Here's an article Calabria wrote for American Banker - he doesn't opine on the NWS, but rather the transfer of risk from the companies to external investors

 

https://www.americanbanker.com/opinion/we-can-reduce-the-gses-risk-without-congress

[Midas79]

Which makes you wonder, are Otting/Calabria really good news for us?

 

This is one of the many reasons I own no common shares. A restructuring that screws the commons is not hard at all, but one that screws the junior preferreds is much harder. Add in the fact that the junior preferred shareholders represent nearly all of the plaintiffs in the major cases and the fact that FHFA took all of the common shareholders' voting rights and I can't imagine buying commons, even at these depressed levels.

[DRValue]

so the rumor is that a close business associate of Mnuchin is to be acting director and a guy who co-wrote a scathing indictment of the NWS (https://www.dropbox.com/s/sb8h3cgub74u9c6/Krimminger-Calabria-HERA-White-Paper-Jan-29.pdf?dl=0) is to be nominated as director (subject to consent by a R majority...and likely will be given a non-confirmation job at FHFA before confirmation).

 

why isn't MBA raging against this?

Which makes you wonder, are Otting/Calabria really good news for us?

 

Calabria has said all sorts of things;

8% real equity, which is unworkable if the companies will be private, shareholders want a decent return, and gse's can't price too high.

Splitting the companies into 6 and giving shareholders shares in them, what's the point? 6 companies doing the same thing in the same place is just multiple Fannie and Freddies that will have the same issue at the same time, and they can't compete on price. So what do you get? Higher prices due to lack of scale.

 

Lots of things have been said that appease politically but don't work practically.

 

Path of least resistance is recap and release plus govt insurance fund.

 

[DRValue]

so the rumor is that a close business associate of Mnuchin is to be acting director and a guy who co-wrote a scathing indictment of the NWS (https://www.dropbox.com/s/sb8h3cgub74u9c6/Krimminger-Calabria-HERA-White-Paper-Jan-29.pdf?dl=0) is to be nominated as director (subject to consent by a R majority...and likely will be given a non-confirmation job at FHFA before confirmation).

 

why isn't MBA raging against this?

Which makes you wonder, are Otting/Calabria really good news for us?

 

Calabria has said all sorts of things;

8% real equity, which is unworkable if the companies will be private, shareholders want a decent return, and gse's can't price too high.

Splitting the companies into 6 and giving shareholders shares in them, what's the point? 6 companies doing the same thing in the same place is just multiple Fannie and Freddies that will have the same issue at the same time, and they can't compete on price. So what do you get? Higher prices due to lack of scale.

 

Lots of things have been said that appease politically but don't work practically.

 

Path of least resistance is recap and release plus govt insurance fund.

 

Does anyone have any thoughts on whether 75b dollars can be raised over 2 years though? Seems pretty ambitious to me.

[Guest cherzeca]

"Does anyone have any thoughts on whether 75b dollars can be raised over 2 years though? Seems pretty ambitious to me."

 

Moelis discusses this in blueprint.  says AIG did it in similar circumstance.  think the cash flows in GSEs support it but yes ambitious

[DRValue]

"Does anyone have any thoughts on whether 75b dollars can be raised over 2 years though? Seems pretty ambitious to me."

 

Moelis discusses this in blueprint.  says AIG did it in similar circumstance.  think the cash flows in GSEs support it but yes ambitious

 

Thanks Chris, should've read it. Admittedly I've only skimmed it.

[Guest cherzeca]

"Calabria has said all sorts of things;"

 

yes when at Cato he was provocative, which i think at Cato is expected.  he has also said for example that fhfa should have put GSEs into receivership rather than conservatorship, as the result would have been "clean GSEs" to start afresh

 

a lot of what he has said is water under the bridge at this point I think, though his views on capital buffer are still germane.

[DRValue]

"Calabria has said all sorts of things;"

 

yes when at Cato he was provocative, which i think at Cato is expected.  he has also said for example that fhfa should have put GSEs into receivership rather than conservatorship, as the result would have been "clean GSEs" to start afresh

 

a lot of what he has said is water under the bridge at this point I think, though his views on capital buffer are still germane.

 

Agree. Point I was trying to make is that his past views don't necessarily mean they'll get implemented, ultimately he'll follow Treasury's lead. Many of these folks are just parroting views the Think Tanks (or their donors) want them to have.

[Guest cherzeca]

"Calabria has said all sorts of things;"

 

yes when at Cato he was provocative, which i think at Cato is expected.  he has also said for example that fhfa should have put GSEs into receivership rather than conservatorship, as the result would have been "clean GSEs" to start afresh

 

a lot of what he has said is water under the bridge at this point I think, though his views on capital buffer are still germane.

 

Agree. Point I was trying to make is that his past views don't necessarily mean they'll get implemented, ultimately he'll follow Treasury's lead. Many of these folks are just parroting views the Think Tanks (or their donors) want them to have.

 

I think of all his past activity the thing that sticks out the most is his co-authorship with m. krimminger of the white paper that the NWS is illegal under HERA (which he was principal author of).  to have that position stick out like a sore thumb and then get nominated director would be indicative of a turnabout in treasury as far as I am concerned, and probably the most salient thing he has written.  his position on the status of NWS to me is not water under the bridge

[orthopa]

Per Calabria's white paper

 

The predictability, fairness, and acceptance of this model led Congress to adopt it

as the basis for authorizing the FHFA with conservatorship powers over Fannie Mae and Freddie

Mac in HERA. Instead of following this precedent, however, FHFA and Treasury have radically

departed from HERA and the principles underlying all other U.S. insolvency frameworks and

sound international standards through a 2012 re-negotiation of the original conservatorship

agreement. Known as the “net worth sweep” or “Third Amendment,” this decision ignored

HERA and decades of established practice, undermined public trust in the government role in

insolvencies, and undercut the vital role that fair treatment in insolvencies plays in a market

economy.

 

Im totally OK with him being HERA director. I also think that we continue to find connections that are not as coincidental as we go along as we try to make them out to be. Its happening before our very eyes. Step by step the pieces are falling in line. We doubt it bc the share price isn't validating it. Its happening slow but sure.

 

 

[DRValue]

Any ideas on which preferred convert under moelis? I can't see any preferred that are convertible. Does it come down to a vote to change the terms?

[DRValue]

Any ideas on which preferred convert under moelis? I can't see any preferred that are convertible. Does it come down to a vote to change the terms?

 

Looks like a two thirds vote to change terms of the certificates, so it'll come down to institutional ownership. Any way to find which hedge funds own what? I don't want to end up holding preferred that don't get a juicy conversion offer.

[Midas79]

Any ideas on which preferred convert under moelis? I can't see any preferred that are convertible. Does it come down to a vote to change the terms?

 

Looks like a two thirds vote to change terms of the certificates, so it'll come down to institutional ownership. Any way to find which hedge funds own what? I don't want to end up holding preferred that don't get a juicy conversion offer.

 

According to this iHub post

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=144033836

big money holds the high yielders like FNMAS, FMCKJ, FNMAT, as well as the $50-par series. That last group includes FNMAG, FNMAK, FNMAL, FNMAM, FNMAN, FMCKP, FMCCK, FMCCO, FMCCP.

 

I would imagine that the conversion offer will take either or both of two things into account: the dividend yield and the then-current price ratio vs commons. I believe there is a reason the high-divs continue to trade at a premium to the low-divs.

[DRValue]

Any ideas on which preferred convert under moelis? I can't see any preferred that are convertible. Does it come down to a vote to change the terms?

 

Looks like a two thirds vote to change terms of the certificates, so it'll come down to institutional ownership. Any way to find which hedge funds own what? I don't want to end up holding preferred that don't get a juicy conversion offer.

 

According to this iHub post

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=144033836

big money holds the high yielders like FNMAS, FMCKJ, FNMAT, as well as the $50-par series. That last group includes FNMAG, FNMAK, FNMAL, FNMAM, FNMAN, FMCKP, FMCCK, FMCCO, FMCCP.

 

I would imagine that the conversion offer will take either or both of two things into account: the dividend yield and the then-current price ratio vs commons. I believe there is a reason the high-divs continue to trade at a premium to the low-divs.

 

Thanks Midas. I'm in fnmaj and fnmas roughly 50/50. Fnmaj seems to have always been relatively cheaper. I'll take a look at adding the other series you mentioned.

[Luke 532]

Calabria.

White House Expected to Nominate Pence Aide to Lead FHFA

https://www.wsj.com/articles/white-house-expected-to-nominate-pence-aide-to-lead-fhfa-1544457677

 

[investorG]

Any ideas on which preferred convert under moelis? I can't see any preferred that are convertible. Does it come down to a vote to change the terms?

 

Looks like a two thirds vote to change terms of the certificates, so it'll come down to institutional ownership. Any way to find which hedge funds own what? I don't want to end up holding preferred that don't get a juicy conversion offer.

 

a potential conversion could be voluntary, with the statement of no dividends for many years as the enticer?

[investorG]

Calabria.

White House Expected to Nominate Pence Aide to Lead FHFA

https://www.wsj.com/articles/white-house-expected-to-nominate-pence-aide-to-lead-fhfa-1544457677

 

if true and confirmed (big ifs), then I guess Mrs. waters will be interested in negotiation.

 

in the mean time, please stop the sweep.

 

[orthopa]

Any ideas on which preferred convert under moelis? I can't see any preferred that are convertible. Does it come down to a vote to change the terms?

 

Looks like a two thirds vote to change terms of the certificates, so it'll come down to institutional ownership. Any way to find which hedge funds own what? I don't want to end up holding preferred that don't get a juicy conversion offer.

 

According to this iHub post

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=144033836

big money holds the high yielders like FNMAS, FMCKJ, FNMAT, as well as the $50-par series. That last group includes FNMAG, FNMAK, FNMAL, FNMAM, FNMAN, FMCKP, FMCCK, FMCCO, FMCCP.

 

I would imagine that the conversion offer will take either or both of two things into account: the dividend yield and the then-current price ratio vs commons. I believe there is a reason the high-divs continue to trade at a premium to the low-divs.

 

There certainly is some inefficency here as FNMAS trades at a ~35% premium to some other floating rate or lower div preferred. Granted liquidity has a price too but div alone wont make up for holding FNMAS in a conversion it seems.

[Wiggins]

https://www.cato.org/multimedia/media-highlights-tv/mark-calabria-discusses-fannie-mae-freddie-mac-fbns-countdown-closing

 

I think this video was posted before; sorry for the duplication but I thought it relevant now that he's the likely FHFA nominee.

 

[DocSnowball]

Any ideas on which preferred convert under moelis? I can't see any preferred that are convertible. Does it come down to a vote to change the terms?

 

Looks like a two thirds vote to change terms of the certificates, so it'll come down to institutional ownership. Any way to find which hedge funds own what? I don't want to end up holding preferred that don't get a juicy conversion offer.

 

 

According to this iHub post

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=144033836

big money holds the high yielders like FNMAS, FMCKJ, FNMAT, as well as the $50-par series. That last group includes FNMAG, FNMAK, FNMAL, FNMAM, FNMAN, FMCKP, FMCCK, FMCCO, FMCCP.

 

I would imagine that the conversion offer will take either or both of two things into account: the dividend yield and the then-current price ratio vs commons. I believe there is a reason the high-divs continue to trade at a premium to the low-divs.

 

Thanks Midas. I'm in fnmaj and fnmas roughly 50/50. Fnmaj seems to have always been relatively cheaper. I'll take a look at adding the other series you mentioned.

 

If the only criterion is 2/3rd of holders have to agree, then is it not possible a new hedge fund can simply buy enough of a stake in the preferred series that are at a lower price when that announcement is made? Greenmail is a valid concern, but I don't think the 2/3rd owner limitation will be a big hurdle. FWIW

 

[DocSnowball]

Calabria.

White House Expected to Nominate Pence Aide to Lead FHFA

https://www.wsj.com/articles/white-house-expected-to-nominate-pence-aide-to-lead-fhfa-1544457677

 

"Mr. Calabria also has questioned the legality of the current arrangement by which the Treasury Department collects the profits of Fannie and Freddie in exchange for its nearly open-ended support of the mortgage-finance giants since the 2008 crisis. That position sides with shareholders of the firms who have challenged in court the FHFA’s administration of the companies."

[DRValue]

Any ideas on which preferred convert under moelis? I can't see any preferred that are convertible. Does it come down to a vote to change the terms?

 

Looks like a two thirds vote to change terms of the certificates, so it'll come down to institutional ownership. Any way to find which hedge funds own what? I don't want to end up holding preferred that don't get a juicy conversion offer.

 

 

According to this iHub post

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=144033836

big money holds the high yielders like FNMAS, FMCKJ, FNMAT, as well as the $50-par series. That last group includes FNMAG, FNMAK, FNMAL, FNMAM, FNMAN, FMCKP, FMCCK, FMCCO, FMCCP.

 

I would imagine that the conversion offer will take either or both of two things into account: the dividend yield and the then-current price ratio vs commons. I believe there is a reason the high-divs continue to trade at a premium to the low-divs.

 

Thanks Midas. I'm in fnmaj and fnmas roughly 50/50. Fnmaj seems to have always been relatively cheaper. I'll take a look at adding the other series you mentioned.

 

If the only criterion is 2/3rd of holders have to agree, then is it not possible a new hedge fund can simply buy enough of a stake in the preferred series that are at a lower price when that announcement is made? Greenmail is a valid concern, but I don't think the 2/3rd owner limitation will be a big hurdle. FWIW

 

Well I'd expect the hedgies to buy them low and less so if this is announced as the price would rise (hopefully). So I'd rather own what they own now, knowing they'd likely get the votes.