hardincap Posted July 17, 2019 Share Posted July 17, 2019 nope. it was picked up by bloomberg: https://www.bloomberg.com/news/articles/2019-05-08/fannie-freddie-may-be-released-without-congress-calabria-says “I think that if we can get them out of conservatorship and then we can set a path, I think a lot of those issues will go away,” he said. Link to comment Share on other sites More sharing options...
Luke 532 Posted July 17, 2019 Share Posted July 17, 2019 nope. it was picked up by bloomberg: https://www.bloomberg.com/news/articles/2019-05-08/fannie-freddie-may-be-released-without-congress-calabria-says “I think that if we can get them out of conservatorship and then we can set a path, I think a lot of those issues will go away,” he said. Thanks. Link to comment Share on other sites More sharing options...
investorG Posted July 17, 2019 Share Posted July 17, 2019 nope. it was picked up by bloomberg: https://www.bloomberg.com/news/articles/2019-05-08/fannie-freddie-may-be-released-without-congress-calabria-says “I think that if we can get them out of conservatorship and then we can set a path, I think a lot of those issues will go away,” he said. the quote might have been edited because it doesn't make sense. it's tough to 'get them out of conservatorship' before capital is raised and capital likely can't get raised if the lawsuits are outstanding. Link to comment Share on other sites More sharing options...
Luke 532 Posted July 17, 2019 Share Posted July 17, 2019 U.S. HOUSING FINANCE REGULATOR SAYS U.S. GOVERNMENT REPORT ON HOUSING FINANCE REFORM IS "ESSENTIALLY DONE," EXPECTS RELEASE IN LATE AUGUST, SEPTEMBER - INTERVIEW @Reuters @michelleprice36 @peteschroeder https://mobile.reuters.com/article/amp/idUSKCN1UC2OE?__twitter_impression=true 2024....sounds like a sloooow capital build. Thoughts? Link to comment Share on other sites More sharing options...
Luke 532 Posted July 17, 2019 Share Posted July 17, 2019 https://www.reuters.com/article/us-fannie-freddie-reform-libor/fannie-freddie-to-eventually-end-buying-libor-mortgages-fhfas-calabria-idUSKCN1UC2PO Fannie, Freddie to eventually end buying LIBOR mortgages: FHFA's Calabria NEW YORK (Reuters) - Fannie Mae and Freddie Mac will eventually halt purchases of U.S. home loans linked to the London interbank offered rate as that index is set to be phased out after 2021, Mark Calabria, the head of the Federal Housing Finance Agency, told Reuters on Wednesday. LIBOR is referenced against $200 trillion worth of U.S. financial products, primarily in interest rate derivatives. There are roughly $1 trillion in adjustable-rate mortgages (ARMs), or about 6.5% of all U.S. home loans outstanding, which are reset against it. Link to comment Share on other sites More sharing options...
Guest cherzeca Posted July 17, 2019 Share Posted July 17, 2019 U.S. HOUSING FINANCE REGULATOR SAYS U.S. GOVERNMENT REPORT ON HOUSING FINANCE REFORM IS "ESSENTIALLY DONE," EXPECTS RELEASE IN LATE AUGUST, SEPTEMBER - INTERVIEW @Reuters @michelleprice36 @peteschroeder https://mobile.reuters.com/article/amp/idUSKCN1UC2OE?__twitter_impression=true 2024....sounds like a sloooow capital build. Thoughts? This time frame seems long and either Calabria was just lowering expectations or he is looking to something like the Layton plan, retain earnings for a while and then do a re-ipo at the end, when greater assurance of success. This timeframe would also give congress more time to pass something, which is something he apparently wants. However, it could also involve a re-IPO up front, and just a conservative take on how much money could be raised by an issuer in conservatorship. I dont think he ever said that a release from conservatorship would come in next year or two, only that a capital raise could be expected in next year. Just dont know whether this is different or not. but think of it, if Fannie needs about $100B of capital (>3%), even if they raise $10B in a re-IPO up front, and they retain some $13B per year, they would only be halfway done after third year. Link to comment Share on other sites More sharing options...
Luke 532 Posted July 17, 2019 Share Posted July 17, 2019 Page 24 of Moelis' updated blueprint created November 2018 estimated exiting conservatorship in 2021 with considerable action in 2018 Q4 (turn off NWS, adjust Senior Pref balance). Given that the plan is released August/September, and no considerable action like turning off NWS or adjust Senior Pref balance takes place before then, that's pretty much 1 year behind the timeline in the updated Moelis version... so if it is something similar to Moelis we'd be looking at year 2022 for exit from conservatorship. If that's the plan, Calabria might as well say exit by or near the end of his term in April 2024. Updated Moelis for your reference: https://gsesafetyandsoundness.com/2018/11/09/oneyearlater/ Link to comment Share on other sites More sharing options...
investorG Posted July 17, 2019 Share Posted July 17, 2019 U.S. HOUSING FINANCE REGULATOR SAYS U.S. GOVERNMENT REPORT ON HOUSING FINANCE REFORM IS "ESSENTIALLY DONE," EXPECTS RELEASE IN LATE AUGUST, SEPTEMBER - INTERVIEW @Reuters @michelleprice36 @peteschroeder https://mobile.reuters.com/article/amp/idUSKCN1UC2OE?__twitter_impression=true 2024....sounds like a sloooow capital build. Thoughts? for jps, perhaps it likely depends -- among other things -- on if they convert into common at some point and/or turn on dividends before exiting conservatorship. could be v good or v bad depending on the details. would be about a little over $2bn annually to turn the dividends back on. maybe this explains the Hamish hume article a little. Link to comment Share on other sites More sharing options...
Luke 532 Posted July 17, 2019 Share Posted July 17, 2019 would be about a little over $2bn annually to turn the dividends back on. maybe this explains the Hamish hume article a little. Meaning Hume's concerned that would be unfavorably good treatment for prefs over common? "The contractual and legal rights of all shareholders should be left in place and respected equally. Anything else will be seen as playing favorites to Wall Street hedge funds that have invested disproportionately in the junior preferred stock. The contractual rights of those shares should be respected, but not favored over those of common shareholders." https://www.americanbanker.com/opinion/recap-of-fannie-and-freddie-must-protect-shareholder-rights Link to comment Share on other sites More sharing options...
orthopa Posted July 17, 2019 Share Posted July 17, 2019 Seems like maybe gov really is waiting for en banc opinion huh? Or at least giving themselves 6-8 weeks of wiggle room just in case. In the May interview(s) Calabria said he had been negotiating with Mnuchin and had a good relationship. He said he was negotiating the sr preferred agreement and NWS. Looking at the timing maybe this outline will discuss stopping the NWS in time to start building capital in 2020? Would be hard to make a judgement without hearing the audio regarding the 2024 comment but just like Otting, Calabria came in with guns a blazing and things have drawn out. Link to comment Share on other sites More sharing options...
Luke 532 Posted July 17, 2019 Share Posted July 17, 2019 CALABRIA SAYS HE WILL RECOMMEND TO CONGRESS THAT THE GOVERNMENT GUARANTEES ONLY FANNIE, FREDDIE MORTGAGE-BACKED SECURITIES, NOT THE COMPANIES @Reuters @michelleprice36 @peteschroeder Link to comment Share on other sites More sharing options...
investorG Posted July 17, 2019 Share Posted July 17, 2019 would be about a little over $2bn annually to turn the dividends back on. maybe this explains the Hamish hume article a little. Meaning Hume's concerned that would be unfavorably good treatment for prefs over common? "The contractual and legal rights of all shareholders should be left in place and respected equally. Anything else will be seen as playing favorites to Wall Street hedge funds that have invested disproportionately in the junior preferred stock. The contractual rights of those shares should be respected, but not favored over those of common shareholders." https://www.americanbanker.com/opinion/recap-of-fannie-and-freddie-must-protect-shareholder-rights perhaps he got wind of a long capital build with no jr pref conversion and wants the jr pref dividends turned on? on the one hand, it makes no sense to pay out $2-2.5bn of annual dividends during a big capital build (33bn x 7%). on the other hand, it could possibly help resolve other areas. Link to comment Share on other sites More sharing options...
Guest cherzeca Posted July 17, 2019 Share Posted July 17, 2019 Why turn divs back on? Link to comment Share on other sites More sharing options...
investorG Posted July 17, 2019 Share Posted July 17, 2019 Why turn divs back on? settle lawsuits? Link to comment Share on other sites More sharing options...
Luke 532 Posted July 17, 2019 Share Posted July 17, 2019 Why turn divs back on? settle lawsuits? It would be a pretty cheap way to do it... $2B-$2.5B/yr or so instead of paying them all off at par right now. If plaintiffs think this gets the prefs trading near par then why not? Would give the plaintiffs the choice of selling the prefs when they're near par, or keep them while enjoying the dividend. Link to comment Share on other sites More sharing options...
Luke 532 Posted July 17, 2019 Share Posted July 17, 2019 "The contractual and legal rights of all shareholders should be left in place and respected equally. Anything else will be seen as playing favorites to Wall Street hedge funds that have invested disproportionately in the junior preferred stock. The contractual rights of those shares should be respected, but not favored over those of common shareholders." https://www.americanbanker.com/opinion/recap-of-fannie-and-freddie-must-protect-shareholder-rights perhaps he got wind of a long capital build with no jr pref conversion and wants the jr pref dividends turned on? on the one hand, it makes no sense to pay out $2-2.5bn of annual dividends during a big capital build (33bn x 7%). on the other hand, it could possibly help resolve other areas. Reads to me like Hume is advocating for the common shareholders to not get unfair treatment, so perhaps he already thinks prefs are going to get preferential treatment (example: dividend turned back on but nothing done for common until 2024). Link to comment Share on other sites More sharing options...
Guest cherzeca Posted July 17, 2019 Share Posted July 17, 2019 Why turn divs back on? settle lawsuits? It would be a pretty cheap way to do it... $2B-$2.5B/yr or so instead of paying them all off at par right now. If plaintiffs think this gets the prefs trading near par then why not? Would give the plaintiffs the choice of selling the prefs when they're near par, or keep them while enjoying the dividend. No way. I just think Calabria and mnuchin are sensing that moelis was too optimistic and they maybe right. Better to under promise and over perform Link to comment Share on other sites More sharing options...
hardincap Posted July 17, 2019 Share Posted July 17, 2019 U.S. HOUSING FINANCE REGULATOR SAYS U.S. GOVERNMENT REPORT ON HOUSING FINANCE REFORM IS "ESSENTIALLY DONE," EXPECTS RELEASE IN LATE AUGUST, SEPTEMBER - INTERVIEW @Reuters @michelleprice36 @peteschroeder https://mobile.reuters.com/article/amp/idUSKCN1UC2OE?__twitter_impression=true 2024....sounds like a sloooow capital build. Thoughts? imo for prefs the timing of exit is less important than canceling the NWS. besides calabria has repeatedly said his job is to set mileposts toward building capital and its up to the companies to get there. and it seems right to me to set expectations for a base case on a very complicated process Link to comment Share on other sites More sharing options...
Luke 532 Posted July 18, 2019 Share Posted July 18, 2019 imo the timing of exit is less important than canceling the NWS. besides calabria has repeatedly said his job is to set mileposts toward building capital and its up to the companies to get there. and it seems right to me to set expectations for a base case on a very complicated process I agree with your comment. "Real repairs" could very well be ending the NWS, among other actions... and Calabria says the time is now. https://business.financialpost.com/pmn/business-pmn/u-s-reform-plan-for-fannie-freddie-seen-by-sept-housing-regulator While Calabria sketched a potential five-year time horizon for removing Fannie and Freddie from conservatorship, he added that the government did not have forever to overhaul them and needs to progress while the housing market remains stable. “The market looks pretty strong now, so that to me is the time when we want to make real repairs, he said. Link to comment Share on other sites More sharing options...
investorG Posted July 18, 2019 Share Posted July 18, 2019 what's the value of a 5 year $25 par value security discounted back for both time value and material event risk? below current prices I assume. Link to comment Share on other sites More sharing options...
investorG Posted July 18, 2019 Share Posted July 18, 2019 U.S. HOUSING FINANCE REGULATOR SAYS U.S. GOVERNMENT REPORT ON HOUSING FINANCE REFORM IS "ESSENTIALLY DONE," EXPECTS RELEASE IN LATE AUGUST, SEPTEMBER - INTERVIEW @Reuters @michelleprice36 @peteschroeder https://mobile.reuters.com/article/amp/idUSKCN1UC2OE?__twitter_impression=true 2024....sounds like a sloooow capital build. Thoughts? imo for prefs the timing of exit is less important than canceling the NWS. besides calabria has repeatedly said his job is to set mileposts toward building capital and its up to the companies to get there. and it seems right to me to set expectations for a base case on a very complicated process do you mean canceling the nws, or, canceling the nws and making the sr pref go away? Link to comment Share on other sites More sharing options...
Luke 532 Posted July 18, 2019 Share Posted July 18, 2019 what's the value of a 5 year $25 par value security discounted back for both time value and material event risk? below current prices I assume. Which is why I think prefs either convert to common in a small IPO fairly soon, or there is an agreement that they will convert at par at some point in the future, or the dividends are turned back on. I don't see any of the litigants going away unless one of those 3 options (and possibly other options) are agreed to. Link to comment Share on other sites More sharing options...
orthopa Posted July 18, 2019 Share Posted July 18, 2019 Why turn divs back on? settle lawsuits? It would be a pretty cheap way to do it... $2B-$2.5B/yr or so instead of paying them all off at par right now. If plaintiffs think this gets the prefs trading near par then why not? Would give the plaintiffs the choice of selling the prefs when they're near par, or keep them while enjoying the dividend. No way. I just think Calabria and mnuchin are sensing that moelis was too optimistic and they maybe right. Better to under promise and over perform why would Hamish hume argue in an editorial one week ago for no conversion then? does a jr pref want to wait for many years with no conversion and no dividends? He is representing both common and preferred shareholders right? Maybe with all of the chatter about conversion to quickly rebuild capital he felt compelled to speak up for the common shareholders he represents. I bet this was probably the jist of it. He also argues that the contractual rights of all shareholders should be respected so if common gets fair treatment then the preferred should get their div? If rebuilding capital entails both the NWS and Sr Preferred be dealt with AND the Jr preferred are not converted what is the mechanism that turns the divs back on? When target capital levels met? When conservatorship is over? It would be interesting to see where the jr preferred would trade relative to par once the NWS is done and the Sr. Preferred are dealt with. I suspect it would purely be based on dividend yield. I think this is important at least for myself BC the NWS ending and the Sr. Preferred being negotiated seems like its going to be way before target capital levels are met and conservatorship is over. Link to comment Share on other sites More sharing options...
hardincap Posted July 18, 2019 Share Posted July 18, 2019 what's the value of a 5 year $25 par value security discounted back for both time value and material event risk? below current prices I assume. my guess is the jps go to 60-75% par on retiring senior prefs (must do so they have ipo option and treasury can monetize their warrants). anyone else want to venture a guess? Link to comment Share on other sites More sharing options...
Guest cherzeca Posted July 18, 2019 Share Posted July 18, 2019 what's the value of a 5 year $25 par value security discounted back for both time value and material event risk? below current prices I assume. as I recall 15% per annum compounded return over 5 years is a double...back when I had clients with a 15% hurdle rate, so I guess it depends on your discount rate Link to comment Share on other sites More sharing options...
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