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

[Jcmeg35]

Thoughts from Tim Mayopoulos on GSE reform:

 

https://www.cnbc.com/video/2019/02/04/former-fannie-mae-ceo-on-the-fate-of-fannie-and-freddie.html

[Midas79]

Thoughts from Tim Mayopoulos on GSE reform:

 

https://www.cnbc.com/video/2019/02/04/former-fannie-mae-ceo-on-the-fate-of-fannie-and-freddie.html

 

Thanks for posting this. It's refreshing that the narrative has turned from "what is housing finance going to look like once Fannie and Freddie are wound down?" a few years ago to "how are we going to recapitalize these companies?"

 

Mayopoulos repeated Otting's $150-200B number. I wonder if that has just become the accepted capital standard now? However, when Watt came up with his $189B capital requirement, that was just the risk-based one. I don't think the entire $189B (minus the $6B that the companies have now) would have to be raised by issuing new shares, just the shortfall to his minimum capital requirement ($103.5-139.5B).

[Guest cherzeca]

"...“Market Access Fund,” funded by a 10 basis point fee on loans financed in the secondary market (which allows banks to charge this fee to all homebuyers, but pocket it if they keep the loans in portfolio)."

 

MAF raises the price for all mortgages, but banks keep fee when keep loans in portfolio, so banks find a way to avoid any fees for low income housing...dont think waters/sharrod will fall for this

[investorG]

Does this sound like Moelis plan? 150-200 billion is what I have read, more like 180 billion. Who would invest when all of shareholders money was looted all along? Very difficult unless they stop NWS immediately and return the excess in some form.

 

Thoughts from Tim Mayopoulos on GSE reform:

 

https://www.cnbc.com/video/2019/02/04/former-fannie-mae-ceo-on-the-fate-of-fannie-and-freddie.html

 

I believe the Moelis plan is unlikely absent legislative reform.  Moelis likely realizes this but importantly the team dangled $100bn in taxpayer warrant values to generate attention.  It's nearly impossible to re-IPO FnF raising many tens of billions of dollars without some legislative certainty.  The outs to this view are large validating check writers like buffett and Tsy (if they return some of excess dividends rather than write down the liquidation preference), but both of these seem like low odds.  the moelis plan likely is a placeholder.

 

regarding legislative, the admin and Crapo don't seem too far off.  It's then up to Maxine Waters and s brown to decide if they want to play; what's in it for them, knowing that their preference would be to only attack the administration?  possibly two things:  a) an explicit fund of 10bp or higher (perhaps $5bn or more) for affordable housing subsidies annually and b) the alternative could be bad with otting / calabria having mostly free reign to do as they please.

 

[investorG]

"...“Market Access Fund,” funded by a 10 basis point fee on loans financed in the secondary market (which allows banks to charge this fee to all homebuyers, but pocket it if they keep the loans in portfolio)."

 

MAF raises the price for all mortgages, but banks keep fee when keep loans in portfolio, so banks find a way to avoid any fees for low income housing...dont think waters/sharrod will fall for this

 

what's their alternative?  do nothing and let otting or Calabria slowly roll back help for affordable housing?

[Guest cherzeca]

@IG

 

"let otting or Calabria slowly roll back help for affordable housing"

 

foundation?  why do you assume this?  to "roll back" would require legislation.

[Guest cherzeca]

Does this sound like Moelis plan? 150-200 billion is what I have read, more like 180 billion. Who would invest when all of shareholders money was looted all along? Very difficult unless they stop NWS immediately and return the excess in some form.

 

Thoughts from Tim Mayopoulos on GSE reform:

 

https://www.cnbc.com/video/2019/02/04/former-fannie-mae-ceo-on-the-fate-of-fannie-and-freddie.html

 

I believe the Moelis plan is unlikely absent legislative reform.  Moelis likely realizes this but importantly the team dangled $100bn in taxpayer warrant values to generate attention.  It's nearly impossible to re-IPO FnF raising many tens of billions of dollars without some legislative certainty.  The outs to this view are large validating check writers like buffett and Tsy (if they return some of excess dividends rather than write down the liquidation preference), but both of these seem like low odds.  the moelis plan likely is a placeholder.

 

regarding legislative, the admin and Crapo don't seem too far off.  It's then up to Maxine Waters and s brown to decide if they want to play; what's in it for them, knowing that their preference would be to only attack the administration?  possibly two things:  a) an explicit fund of 10bp or higher (perhaps $5bn or more) for affordable housing subsidies annually and b) the alternative could be bad with otting / calabria having mostly free reign to do as they please.

 

disagree.  if congressional inaction continues, as I expect, and admin moves forward with what it can do within its powers, then I believe the market will recognize congressional noise for what it is...and congress will move on to new issues like it always does

[investorG]

@IG

 

"let otting or Calabria slowly roll back help for affordable housing"

 

foundation?  why do you assume this?  to "roll back" would require legislation.

 

mnuchin (otting) has made comments in congressional hearings that implies he doesn't support the fringe lending that FnF does.

 

Calabria's libertarian background and his anti-GSE writings (even if tempered).

 

FHFA head could impose loan level risk based pricing, change LTVs, DTIs, etc.  full powers (at least thus far).

 

[Guest cherzeca]

@IG

 

"let otting or Calabria slowly roll back help for affordable housing"

 

foundation?  why do you assume this?  to "roll back" would require legislation.

 

mnuchin (otting) has made comments in congressional hearings that implies he doesn't support the fringe lending that FnF does.

 

Calabria's libertarian background and his anti-GSE writings (even if tempered).

 

FHFA head could impose loan level risk based pricing, change LTVs, DTIs, etc.  full powers (at least thus far).

 

there are GSE charter and congressional mandates that have nothing to do with LTV.  this is a complete red herring.  liar loans and 105% loan to value mortgages are no longer statutorily permitted.  this is a nonissue. 

 

I am all for inverting and considering the other side.  the other side has to at least make sense though.

[investorG]

@IG

 

"let otting or Calabria slowly roll back help for affordable housing"

 

foundation?  why do you assume this?  to "roll back" would require legislation.

 

mnuchin (otting) has made comments in congressional hearings that implies he doesn't support the fringe lending that FnF does.

 

Calabria's libertarian background and his anti-GSE writings (even if tempered).

 

FHFA head could impose loan level risk based pricing, change LTVs, DTIs, etc.  full powers (at least thus far).

 

there are GSE charter and congressional mandates that have nothing to do with LTV.  this is a complete red herring.  liar loans and 105% loan to value mortgages are no longer statutorily permitted.  this is a nonissue. 

 

I am all for inverting and considering the other side.  the other side has to at least make sense though.

 

I am not interested in arguing and will stop here but it's not a bold statement to say that that the FHFA head has material power to influence the subsidies flowing to lower income, higher risk, and affordable housing through FnF.

[Guest cherzeca]

one reason why I don't think you will see congressional action on GSEs this year is the chairwoman of the house committee on financial services: 

 

I understand politicians grandstand for public and then are sometimes able to deal in private.  but any legislative proposal that has even a hint of benefitting banks to the detriment of GSEs (such as Crapo "plan") looks to me like it is DOA in house FSC. 

[Guest cherzeca]

@IG

 

"let otting or Calabria slowly roll back help for affordable housing"

 

foundation?  why do you assume this?  to "roll back" would require legislation.

 

mnuchin (otting) has made comments in congressional hearings that implies he doesn't support the fringe lending that FnF does.

 

Calabria's libertarian background and his anti-GSE writings (even if tempered).

 

FHFA head could impose loan level risk based pricing, change LTVs, DTIs, etc.  full powers (at least thus far).

 

there are GSE charter and congressional mandates that have nothing to do with LTV.  this is a complete red herring.  liar loans and 105% loan to value mortgages are no longer statutorily permitted.  this is a nonissue. 

 

I am all for inverting and considering the other side.  the other side has to at least make sense though.

 

I am not interested in arguing and will stop here but it's not a bold statement to say that that the FHFA head has material power to influence the subsidies flowing to lower income, higher risk, and affordable housing through FnF.

 

so you are saying ms. waters would prefer the Crapo "plan"?  I am not trying to be argumentative, I just think things have gotten rather tertiary, an admin plan that without congressional action will probably resemble moelis blueprint, Crapo "plan" (which is inconsistent with moelis blueprint) and whatever might be going on in ms waters' head.  trying to understand how your thinking jives with what I am seeing as the lay of the land, as murky as it might be 

[investorG]

@IG

 

"let otting or Calabria slowly roll back help for affordable housing"

 

foundation?  why do you assume this?  to "roll back" would require legislation.

 

mnuchin (otting) has made comments in congressional hearings that implies he doesn't support the fringe lending that FnF does.

 

Calabria's libertarian background and his anti-GSE writings (even if tempered).

 

FHFA head could impose loan level risk based pricing, change LTVs, DTIs, etc.  full powers (at least thus far).

 

there are GSE charter and congressional mandates that have nothing to do with LTV.  this is a complete red herring.  liar loans and 105% loan to value mortgages are no longer statutorily permitted.  this is a nonissue. 

 

I am all for inverting and considering the other side.  the other side has to at least make sense though.

 

I am not interested in arguing and will stop here but it's not a bold statement to say that that the FHFA head has material power to influence the subsidies flowing to lower income, higher risk, and affordable housing through FnF.

 

so you are saying ms. waters would prefer the Crapo "plan"?  I am not trying to be argumentative, I just think things have gotten rather tertiary, an admin plan that without congressional action will probably resemble moelis blueprint, Crapo "plan" (which is inconsistent with moelis blueprint) and whatever might be going on in ms waters' head.  trying to understand how your thinking jives with what I am seeing as the lay of the land, as murky as it might be

 

i believe maxine preferred things as they were before -- with a democrat like mel watt in charge to keep subsidies flowing.  forward looking, i believe a toned down crapo plan (the banksters would have to compromise) with a bump in the 10bp explicit gfee carveout from his original offer 'might' be considered superior to letting otting / calabria run free even though she hates working with the trump admin.  she and sherrod would have a 5-10bn annual kitty for subsides that would be legislatively entrenched.  i think if you separate the subsidies from the GSEs then her resistance to reducing the GSEs footprint (phillips' / crapo's goals) likely lessens.

 

[Guest cherzeca]

see pps 15-17 for GSE low income housing requirements for next three years:  https://www.fhfa.gov/SupervisionRegulation/Rules/RuleDocuments/2018-2020%20Enteprise%20Housing%20Goals%20Final%20Rule.pdf

 

there is nothing otting/calabria can do about these.  correct me if I am wrong, but the Crapo "plan" MAP would eliminate all of these GSE duty to serve requirements, and would only be imposed on GSE guaranteed mbs going forward.  just don't see the trade going down in house FSC

[DRValue]

https://pbs.twimg.com/media/DyqO-b1WoAAZdww.jpg:large

 

Calabria confirmation hearing next week?

 

That would be much quicker than i thought and would contradict Otting's statements about getting a lot done before Mark starts. Unless he means not the quantity, but the materiality of what he does.

[Midas79]

https://pbs.twimg.com/media/DyqO-b1WoAAZdww.jpg:large

 

Calabria confirmation hearing next week?

 

That would be much quicker than i thought and would contradict Otting's statements about getting a lot done before Mark starts. Unless he means not the quantity, but the materiality of what he does.

 

Wow, that would be much faster than many, or even any, of us expected. Still, Otting will have to do or say something very soon due to FnF's earnings coming out. If there is no change and the "we expect to pay Treasury a dividend" language remains, it will take a lot of wind out of our sails.

 

Otting's comments could also mean that he didn't expect Calabria to be confirmed this quickly either, so he might not have time to do everything he thought he needed to do before May, or whenever it was he expected Calabria to be confirmed.

[DRValue]

https://pbs.twimg.com/media/DyqO-b1WoAAZdww.jpg:large

 

Calabria confirmation hearing next week?

 

That would be much quicker than i thought and would contradict Otting's statements about getting a lot done before Mark starts. Unless he means not the quantity, but the materiality of what he does.

 

Wow, that would be much faster than many, or even any, of us expected. Still, Otting will have to do or say something very soon due to FnF's earnings coming out. If there is no change and the "we expect to pay Treasury a dividend" language remains, it will take a lot of wind out of our sails.

 

Otting's comments could also mean that he didn't expect Calabria to be confirmed this quickly either, so he might not have time to do everything he thought he needed to do before May, or whenever it was he expected Calabria to be confirmed.

 

Thinking about this, I would imagine the Treasury has been working on this plan for the past 2 years and its purely political / optical reasons that it hasn't been announced. This plays into the timeline of Otting not releasing the plan for a few uncertain weeks. Perhaps Otting needs to look like he is following the nominees lead. The number of weeks ties in with Clabria possibly having a hearing next week. Quicker than we thought but I would imagine that is what Otting is actually waiting for.

 

 

 

[muscleman]

I continue to see weakness in FNMAS through technical analysis. I am really bullish about the fundamentals, but it is not confirming with my technical analysis, so I am still staying away from it.

I am really curious what will happen next.

Technical analysis doesn't work in certain cases like MBIA's settlement with BAC back in 2013, but I think for FNMAS, technical will take a lead in giving us a clue, because the reform talk is wide spread among many people. The court ruling may be a surprise, but anything coming out of the admin announcement should not be a technical surprise.

[Midas79]

Calabria should not be confirmed before Otting sets stage for him, talk about Calabria getting grilled in the hearing and make promises that he can't keep, sharks there. They should just release the two as they were, they have been reformed. Give back the excess money they took and let congress deal with the rest. Everyone happy.

 

This brings up another idea. I heard somewhere that a key Senator on whatever committee is in charge of confirmations is a friend and supporter of Calabria, and would presumably push to have Calabria confirmed quickly. I wonder if that same Senator, or another group with influence, wants Calabria's hearing to come before FnF's earnings, so that any announcement by Otting around that time can't be brought up at the hearing (because it won't have happened yet)?

[Guest cherzeca]

https://pbs.twimg.com/media/DyqO-b1WoAAZdww.jpg:large

 

Calabria confirmation hearing next week?

 

That would be much quicker than i thought and would contradict Otting's statements about getting a lot done before Mark starts. Unless he means not the quantity, but the materiality of what he does.

 

Wow, that would be much faster than many, or even any, of us expected. Still, Otting will have to do or say something very soon due to FnF's earnings coming out. If there is no change and the "we expect to pay Treasury a dividend" language remains, it will take a lot of wind out of our sails.

 

Otting's comments could also mean that he didn't expect Calabria to be confirmed this quickly either, so he might not have time to do everything he thought he needed to do before May, or whenever it was he expected Calabria to be confirmed.

 

Thinking about this, I would imagine the Treasury has been working on this plan for the past 2 years and its purely political / optical reasons that it hasn't been announced. This plays into the timeline of Otting not releasing the plan for a few uncertain weeks. Perhaps Otting needs to look like he is following the nominees lead. The number of weeks ties in with Clabria possibly having a hearing next week. Quicker than we thought but I would imagine that is what Otting is actually waiting for.

 

problem is, no one is really in charge now.  yes Mnuchin is in charge, but he is kinda busy.  his #2 would appear to be more aide de camp than leader.  Otting can lead but he is temporary.  I suppose Calabria is the best choice to implement, so the talking stick will fall to him.  what will be interesting is how much he divulges in front of senate banking committee, and how he characterizes Crapo "plan".  this is not the case of a judicial nomination, where answers to questions about how you would rule on a hypothetical case are inappropriate.  Calabria will be asked if/how he will recap/release and reward all of the speculators, etc and he cant really duck this...though I suppose he might say the plan will be released soon...

[Guest cherzeca]

I continue to see weakness in FNMAS through technical analysis. I am really bullish about the fundamentals, but it is not confirming with my technical analysis, so I am still staying away from it.

I am really curious what will happen next.

Technical analysis doesn't work in certain cases like MBIA's settlement with BAC back in 2013, but I think for FNMAS, technical will take a lead in giving us a clue, because the reform talk is wide spread among many people. The court ruling may be a surprise, but anything coming out of the admin announcement should not be a technical surprise.

 

hey MM, for me TA seems to be good at measuring sentiment about earnings/business prospects, but with fnmas it seems sentiment about en banc court ruling and what admin plan looks like and how it will be received and whether ms. waters wants to play ball is not something TA is particularly useful at. comments?

 

edit:  I do agree that fnmas price has been weak, but that could be TA just showing confusion about prospects which in this name is a given

[rros]

I continue to see weakness in FNMAS through technical analysis. I am really bullish about the fundamentals, but it is not confirming with my technical analysis, so I am still staying away from it.

I am really curious what will happen next.

Technical analysis doesn't work in certain cases like MBIA's settlement with BAC back in 2013, but I think for FNMAS, technical will take a lead in giving us a clue, because the reform talk is wide spread among many people. The court ruling may be a surprise, but anything coming out of the admin announcement should not be a technical surprise.

You are out. Might be negatively biased. I am in. Maybe positively biased. So I see a high level bull flag, a top level triangle forming like the one formed from 11/16 through 02/17 after which prices broke to the upside. Which may mean another 4 weeks to go before we see any direction.

[Luke 532]

Technical Analysis at COB&F?  Guys...

[DRValue]

Technical Analysis at COB&F?  Guys...

 

Buffett gave up on technical analysis when he realised he could turn the chart upside down and get the same result.

[rros]

Technical Analysis at COB&F?  Guys...

Ah... some of us may just be in the ignore list. Don't worry.

 

But seriously, to give credit to TA... price formations only reflect behavior patterns of participants. The ones above show indecision. Which we as well seem to have. One day we are bullish, the next we can't take it anymore.