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

[Guest cherzeca]

fwiw, found this write up on FNMAS on VIC:  https://www.valueinvestorsclub.com/idea/FEDERAL_NATIONAL_MORTGA_ASSN/4975387968

 

you likely will have to sign up (provide email etc) to get access.

 

it is more of a survey than an analysis, but it is a good survey

[DRValue]

Tomorrow...

 

An update in Bhatti vs. FHFA: The Eighth Circuit will hear oral argument in Bhatti v. FHFA at 9:00 a.m. on Tues., Oct. 15, 2019, in St. Paul, Minn., before Judges Lavenski R. Smith, Raymond W. Gruender and Duane Benton.

 

all 3 judges appointed by a bush

 

 

"We are live at the courthouse in St. Paul, MN, for the hearing of Bhatti v. #FHFA, begins at 9am Central Time. Research note coming to clients after! #GSEs #housingfinance #8thCircuit"

 

I expect they'll put some things on Twitter, hopefully.

[Luke 532]

Tomorrow...

 

An update in Bhatti vs. FHFA: The Eighth Circuit will hear oral argument in Bhatti v. FHFA at 9:00 a.m. on Tues., Oct. 15, 2019, in St. Paul, Minn., before Judges Lavenski R. Smith, Raymond W. Gruender and Duane Benton.

 

all 3 judges appointed by a bush

 

Audio recording: http://media-oa.ca8.uscourts.gov/OAaudio/2019/10/182506.MP3

[rros]

Tomorrow...

 

An update in Bhatti vs. FHFA: The Eighth Circuit will hear oral argument in Bhatti v. FHFA at 9:00 a.m. on Tues., Oct. 15, 2019, in St. Paul, Minn., before Judges Lavenski R. Smith, Raymond W. Gruender and Duane Benton.

 

all 3 judges appointed by a bush

 

Audio recording: http://media-oa.ca8.uscourts.gov/OAaudio/2019/10/182506.MP3

Thank you, Luke 5:32.

[DRValue]

So how long will it take to decide bhatti?

[Luke 532]

The latest from Layton...

Housing Finance Reform: Down to Two Models, Both Built on the GSEs

https://www.jchs.harvard.edu/blog/housing-finance-reform-down-to-two-models-both-built-on-the-gses/

[Guest cherzeca]

David Thompson did a great job in the bhatti oral argument before the 8th C merits panel, but it was a messy argument owing to a contentious judge, with the other two being more reticent.  long story short, if scotus grants review of the collins cert petition, bhatti will be back back burner

[rros]

David Thompson did a great job in the bhatti oral argument before the 8th C merits panel, but it was a messy argument owing to a contentious judge, with the other two being more reticent.  long story short, if scotus grants review of the collins cert petition, bhatti will be back back burner

Thank you, Chris. Tough judge.

[Guest cherzeca]

David Thompson did a great job in the bhatti oral argument before the 8th C merits panel, but it was a messy argument owing to a contentious judge, with the other two being more reticent.  long story short, if scotus grants review of the collins cert petition, bhatti will be back back burner

Thank you, Chris. Tough judge.

 

bombastic, cranky and annoying. 

[Luke 532]

Calabria: "I should be able to announce within the next couple weeks whether we are going to re-propose" the capital rule.

[investorG]

David Thompson did a great job in the bhatti oral argument before the 8th C merits panel, but it was a messy argument owing to a contentious judge, with the other two being more reticent.  long story short, if scotus grants review of the collins cert petition, bhatti will be back back burner

 

From what I can tell, I'm not rooting for the SC to take our case, even though I understand why it was filed. 

 

imo it's the least compelling of the stools we're counting on on:  administrative settlement / solution,  APA claim (collins), damages from lamberth / sweeney, and constitutional.  if the FHFA structure is unconstitutional, fine, but it appears too easy to just apply forward relief; backwards looking, it seems arbitrary to say some decisions were fine but some deserve compensation. 

 

also, it could delay everything as everyone waits until june 2020.

 

[Luke 532]

Calabria: "I should be able to announce within the next couple weeks whether we are going to re-propose" the capital rule.

 

Calabria also teased that an announcement on @FHFA's capital standards rule could come "in the next couple weeks."  Whether the rule is finalized or re-proposed is critical to the #GSE reform timeline.

[Guest cherzeca]

David Thompson did a great job in the bhatti oral argument before the 8th C merits panel, but it was a messy argument owing to a contentious judge, with the other two being more reticent.  long story short, if scotus grants review of the collins cert petition, bhatti will be back back burner

 

From what I can tell, I'm not rooting for the SC to take our case, even though I understand why it was filed. 

 

imo it's the least compelling of the stools we're counting on on:  administrative settlement / solution,  APA claim (collins), damages from lamberth / sweeney, and constitutional.  if the FHFA structure is unconstitutional, fine, but it appears too easy to just apply forward relief; backwards looking, it seems arbitrary to say some decisions were fine but some deserve compensation. 

 

also, it could delay everything as everyone waits until june 2020.

 

yes and no.  given the collins APA opinion, and assuming it is not appealed since not a final judgment, that process will proceed at the district court level irrespective of scotus review of the constitutional claim.  so any scotus review would be a total additional opportunity for Ps.  an easy way out for scotus would be just to affirm on both structure and remedy, so there would be nothing gained, but nothing to my mind lost.  yes a removable at will Calabria post 2020 would be one result of that, but once GSEs move out of conservatorship and into "consent decree," and the final capital rule is promulgated, any new fhfa director would have few degrees of freedom.

[rros]

David Thompson did a great job in the bhatti oral argument before the 8th C merits panel, but it was a messy argument owing to a contentious judge, with the other two being more reticent.  long story short, if scotus grants review of the collins cert petition, bhatti will be back back burner

 

From what I can tell, I'm not rooting for the SC to take our case, even though I understand why it was filed. 

 

imo it's the least compelling of the stools we're counting on on:  administrative settlement / solution,  APA claim (collins), damages from lamberth / sweeney, and constitutional.  if the FHFA structure is unconstitutional, fine, but it appears too easy to just apply forward relief; backwards looking, it seems arbitrary to say some decisions were fine but some deserve compensation. 

 

also, it could delay everything as everyone waits until june 2020.

 

yes and no.  given the collins APA opinion, and assuming it is not appealed since not a final judgment, that process will proceed at the district court level irrespective of scotus review of the constitutional claim.  so any scotus review would be a total additional opportunity for Ps.  an easy way out for scotus would be just to affirm on both structure and remedy, so there would be nothing gained, but nothing to my mind lost.  yes a removable at will Calabria post 2020 would be one result of that, but once GSEs move out of conservatorship and into "consent decree," and the final capital rule is promulgated, any new fhfa director would have few degrees of freedom.

Does "consent decree" mean they will be operating almost as *free* with a greater likelihood of dividends reinstatement?

[Guest cherzeca]

@rros

 

fhfa hasn't defined what the consent decrees will look like but I believe 1) it is necessary for GSEs to be out of conservatorship once they do offerings, as the power for evil represented by a HERA conservatorship must no longer apply once new investors pony up cash (and once released from conservatorship the GSEs cannot easily be put back into conservatorship in the absence of another FC), so that 2) the consent decrees will constitute contracts between fhfa and GSEs that will pertain to the GSEs operations (ie no more building up of whole loan portfolios, charge g fees of x etc), so that fhfa maintains whatever controls it believes it needs until the GSEs satisfy the capital rule, at which time, one presumes and hopes, the consent decree falls away. 

[rros]

@rros

 

fhfa hasn't defined what the consent decrees will look like but I believe 1) it is necessary for GSEs to be out of conservatorship once they do offerings, as the power for evil represented by a HERA conservatorship must no longer apply once new investors pony up cash (and once released from conservatorship the GSEs cannot easily be put back into conservatorship in the absence of another FC), so that 2) the consent decrees will constitute contracts between fhfa and GSEs that will pertain to the GSEs operations (ie no more building up of whole loan portfolios, charge g fees of x etc), so that fhfa maintains whatever controls it believes it needs until the GSEs satisfy the capital rule, at which time, one presumes and hopes, the consent decree falls away.

So c-ship as we know it should be over, replaced by these internal agreements. Is that it? And what role will Tsy play, in your judgement? Will Tsy be part of the consents in any way? Are you also suggesting Tsy's role will finally be that of a simple creditor (charging a commitment fee for the unused line and letting go of the Srs.)? That would make the Jrs. whole in an instant.

[Guest cherzeca]

@rros

 

fhfa hasn't defined what the consent decrees will look like but I believe 1) it is necessary for GSEs to be out of conservatorship once they do offerings, as the power for evil represented by a HERA conservatorship must no longer apply once new investors pony up cash (and once released from conservatorship the GSEs cannot easily be put back into conservatorship in the absence of another FC), so that 2) the consent decrees will constitute contracts between fhfa and GSEs that will pertain to the GSEs operations (ie no more building up of whole loan portfolios, charge g fees of x etc), so that fhfa maintains whatever controls it believes it needs until the GSEs satisfy the capital rule, at which time, one presumes and hopes, the consent decree falls away.

So c-ship as we know it should be over, replaced by these internal agreements. Is that it? And what role will Tsy play, in your judgement? Will Tsy be part of the consents in any way? Are you also suggesting Tsy's role will finally be that of a simple creditor (charging a commitment fee for the unused line and letting go of the Srs.)? That would make the Jrs. whole in an instant.

 

fhfa will negotiate the consent decrees with GSEs, but of course treasury will consult with fhfa.  treasury will also consult with fhfa re capital rule.  treasury's starring role will be getting capital structure ready for recap/re-ipo/litigation settlement.  I dont see any of that happening unless the senior prefs are nuked.

[Luke 532]

I dont see any of that happening unless the senior prefs are nuked.

 

What do you think is a reasonable expectation as to when that might happen?  Thanks.

[Guest cherzeca]

I dont see any of that happening unless the senior prefs are nuked.

 

What do you think is a reasonable expectation as to when that might happen?  Thanks.

 

later than we would like.  my nose tells me that treasury/fhfa has gotten good informal advice from bankers...leading to the consent decree idea as being necessary, and also having a sufficient capital cushion before the first offering such that the first offering gets the GSEs close (if not to) the capital rule requirement.  just makes sense.  hence the retained earnings/capital build up period.

 

[Luke 532]

later than we would like.  my nose tells me that treasury/fhfa has gotten good informal advice from bankers...leading to the consent decree idea as being necessary, and also having a sufficient capital cushion before the first offering such that the first offering gets the GSEs close (if not to) the capital rule requirement.  just makes sense.  hence the retained earnings/capital build up period.

 

Thank you.  I always appreciate your input.

[Guest cherzeca]

God knows I hate setting up IMF as an authority but this gets at what might be the capital threshold for transitioning from conservatorship to consent decree: 

[rros]

God knows I hate setting up IMF as an authority but this icee gets at what might be the capital threshold for transitioning from conservatorship to consent decree: 

Appears to be good news, if correct. Maybe I will buy back some of what I sold lol. Moving in this direction could mean prices closer to face value within 12 months. Thank you for your responses, Chris!

[Luke 532]

What We’re Hearing: Talk of a GSE Legal Settlement? / Using Consent Decrees / Goldman’s New Prime Non-Agency MBS / Fannie Exec Departs for Industry Vendor

https://www.insidemortgagefinance.com/articles/216144-what-were-hearing-talk-of-a-gse-legal-settlement-using-consent-decrees-goldmans-new-prime-non-agency-mbs-fannie-exec-departs-for-industry-vendor?v=preview

The Treasury Department is weighing a legal settlement with the junior shareholders in Fannie Mae and Freddie Mac stock. At least that was one rumor making the rounds this week in both New York and Washington. One veteran MBS source said talks between these investors (who sued the government over the quarterly profit sweep) have taken on a new urgency ever since the Trump White House released its housing-finance reform blueprint in early September. For more on the story, see Inside MBS & ABS, now available online…

 

By the way, we ran the settlement rumor by a very large GSE (preferred) shareholder who did not respond to our inquiry…

[Williams406]

 

".@MarkCalabria @FHFA Director at @AEI-CRN housing conference on 10/16: it will be very difficult for @FannieMae and @FreddieMac to raise capital in a downturn, "we are focused on urgency of raising capital" $FNMA $FMCC

10:47 AM - 17 Oct 2019"

 

This is the sort of thing I want to hear. Sure, underpromise and overdeliver, and be conservative with time frames...good principles. But let us know you are operating with some urgency. Better yet, don't tell us how fast you're going to hustle down the first base line, just go ahead and do a Pete Rose belly slide in to the bag and show us. That will get you in to MY Hall of Fame.

[Guest cherzeca]

the litigation settlement negotiations rumored above are possible.  they are likely to be protracted for a number of reasons so getting started early and trying to figure out what ballpark people are in makes sense.  I would believe them more if financial advisors had been hired already because this negotiation is a mixed legal/financial process.  having said that, preliminary soundings out would be wise if they are occurring.