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


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Posted (edited)

The eventual FHFA selection is less important than in prior instances because the head of the agency now reports to the President.   Our opponents might convince the White House to select Sandra but the likely fact that Calhoun and his utility paper were at least close to being selected indicates some sliver of potential from this administration over the next 3 years.

Edited by investorG
Posted
1 hour ago, investorG said:

The eventual FHFA selection is less important than in prior instances because the head of the agency now reports to the President.   Our opponents might convince the White House to select Sandra but the likely fact that Calhoun and his utility paper were at least close to being selected indicates some sliver of potential from this administration over the next 3 years.

If Thompson is selected, the companies aren't leaving the conservatorship as regulated utilities. The value transfer will occur to interested financial establishment parties without any help to the affordable housing agenda that is supposedly what this Administration ran on. Just look who is pushing for her to be in- the same crew that was in favor of the NWS.

Posted
On 9/28/2021 at 11:57 AM, MrSwankyPants said:

Do we have any updates on what will happen on the 30th? Will the date just be pushed?

 

None that I am aware. A part of me asks how part of the PSPA can be ignored but the verbage leaves open missing the deadline thanks to the word "endeavor". I expect this to be missed and a permanent FHFA director to be named after the debt ceiling, infrastructure bill fiasco is voted on or more finalized. A part of me thinks that the whole Calhoun rumor was just that but Maxine acting out makes me think otherwise. 

Posted
On 9/29/2021 at 6:16 PM, orthopa said:

None that I am aware. A part of me asks how part of the PSPA can be ignored but the verbage leaves open missing the deadline thanks to the word "endeavor". I expect this to be missed and a permanent FHFA director to be named after the debt ceiling, infrastructure bill fiasco is voted on or more finalized. A part of me thinks that the whole Calhoun rumor was just that but Maxine acting out makes me think otherwise. 

It was built in from the get go by putting the word "endeavor". Truth is no one knows anything and no one cares enough to change the status quo. Inertia may take it all the way to when the warrants expire, but even then what. We all got legal lottery tickets and are wondering if we are holding on to worthless stubs or will even breakeven eventually. This is as expensive an education as they come! 

Posted

The market is likely mispricing FnF securities - both common and preferred - by a large margin.

 

Included in the $3.5trn House build back better plan is $327 billion for affordable housing;  broken down, $90bn for rental assistance, $80bn for public housing preservation, and the rest spread out over various smaller programs.

 

The 3.5trn headline number will likely shrink to ~ 2.0trn.   The housing bucket will likely be cut significantly if not completely because it's lower in the priorities than healthcare, paid leave, child care, and climate.   The final amount should be known within 2 months.

 

This will likely leave a $100 - 250bn hole in the housing program bucket, which could be either be ignored or more likely partially filled in by getting going on monetizing the government's FnF stake.

Posted

In the Lamberth case, Plaintiffs and defendants both agree all current stockholders are parties to the case, so Lamberth will likely certify those classes. Perhaps this will give comfort to those wishing to buy. This has been a disappointingly protracted process but I think we can all agree the GSEs are building capital, receivership is in the rear view mirror, and they're here to stay. I feel good about it, just a question of time and timing. On another note, this reminds me a bit of a distressed debt picture where you have shareholders opining that a corporation should buy back corporate debt for pennies on the dollar. That almost never happens (but occasionally does). The GSEs could be buying back preferred shares for pennies on the dollar and retiring them. It would be a smart move but I seriously doubt they're doing it.

http://www.glenbradford.com/2021/10/fnma-fanniegate-1080/

Posted
9 hours ago, Wiggins said:

In the Lamberth case, Plaintiffs and defendants both agree all current stockholders are parties to the case, so Lamberth will likely certify those classes. Perhaps this will give comfort to those wishing to buy. This has been a disappointingly protracted process but I think we can all agree the GSEs are building capital, receivership is in the rear view mirror, and they're here to stay. I feel good about it, just a question of time and timing. On another note, this reminds me a bit of a distressed debt picture where you have shareholders opining that a corporation should buy back corporate debt for pennies on the dollar. That almost never happens (but occasionally does). The GSEs could be buying back preferred shares for pennies on the dollar and retiring them. It would be a smart move but I seriously doubt they're doing it.

http://www.glenbradford.com/2021/10/fnma-fanniegate-1080/

Of course they're not buying back preferred shares in the open market because:

A) Conservatorship rules don't allow it

B) Such a program would need to be made public before it begins.

Posted
2 hours ago, COBFInfinity said:

Of course they're not buying back preferred shares in the open market because:

A) Conservatorship rules don't allow it

B) Such a program would need to be made public before it begins.

Not sure where your info comes from... HERA? I know they can't get rid of SPS without Treasury approval.

Posted
1 hour ago, Wiggins said:

Not sure where your info comes from... HERA? I know they can't get rid of SPS without Treasury approval.

They aren't even allowed to pay dividends, so of course they can't buy the securities. And especially without public notice.

Posted
1 hour ago, COBFInfinity said:

They aren't even allowed to pay dividends, so of course they can't buy the securities. And especially without public notice.

Not the same thing. Besides, with Treasury's approval they can basically do anything.

If they finally decide to make a move (the Admin, that is), then it would be a smart move.

Posted
12 hours ago, Wiggins said:

Not the same thing. Besides, with Treasury's approval they can basically do anything.

If they finally decide to make a move (the Admin, that is), then it would be a smart move.

You were asking if they might be currently doing it. I said no. Now you're saying they could do it in the future. Those are completely different things. Treasury has not given approval.

Posted
On 10/16/2021 at 11:00 AM, COBFInfinity said:

You were asking if they might be currently doing it. I said no. Now you're saying they could do it in the future. Those are completely different things. Treasury has not given approval.

My original post on it was actually a comment not a question and I wasn't looking for a debate on whether it was actually happening because I don't think it is. But your comment raises an interesting point which is your assertion that the GSEs are constrained from taking certain actions. I view the GSEs as de facto extensions of the Biden administration given the SCOTUS ruling, and view them as very unconstrained given the SCOTUS ruling. I see any action or inaction as more of a willful choice of the administration, rather than lawful constraints. Perhaps I'm wrong about that. But who would stop the administration from doing whatever the hell they want?

 

 

Posted
3 hours ago, Wiggins said:

My original post on it was actually a comment not a question and I wasn't looking for a debate on whether it was actually happening because I don't think it is. But your comment raises an interesting point which is your assertion that the GSEs are constrained from taking certain actions. I view the GSEs as de facto extensions of the Biden administration given the SCOTUS ruling, and view them as very unconstrained given the SCOTUS ruling. I see any action or inaction as more of a willful choice of the administration, rather than lawful constraints. Perhaps I'm wrong about that. But who would stop the administration from doing whatever the hell they want?

 

 

I'm not disputing that it sure seems like GSEs can be treated however the hell any POTUS wants, but securities laws would require any open market purchase program or tender to be announced in advance. Which means the prices wouldn't stay anywhere near 6% of par after such an announcement. All that said, I don't think financial engineering to maximize equity value is part of the plan here.

Posted
2 hours ago, COBFInfinity said:

I'm not disputing that it sure seems like GSEs can be treated however the hell any POTUS wants, but securities laws would require any open market purchase program or tender to be announced in advance. Which means the prices wouldn't stay anywhere near 6% of par after such an announcement. All that said, I don't think financial engineering to maximize equity value is part of the plan here.

Thank you for revealing your knowledge on this subject.

Posted (edited)

FNMA spiked 30% today into the close on 3x average volume. FMCC up similarly. I don't see any news or announcements on Yahoo, Seeking alpha, etc. 

 

Is this just random trade activity? Or was something released? 

Edited by TwoCitiesCapital
.
Posted
1 hour ago, TwoCitiesCapital said:

FNMA spiked 30% today into the close on 3x average volume. FMCC up similarly. I don't see any news or announcements on Yahoo, Seeking alpha, etc. 

 

Is this just random trade activity? Or was something released? 

FHFA Acting Director says they will continue to build capital. I guess that's better than the opposite, but the current capital plan is still a dead end.

 

https://www.marketscreener.com/news/latest/Prepared-Remarks-of-Sandra-L-Thompson-Acting-Director-FHFA-at-the-2021-Mortgage-Ban---36710840/

Posted
On 10/18/2021 at 6:14 PM, TwoCitiesCapital said:

FNMA spiked 30% today into the close on 3x average volume. FMCC up similarly. I don't see any news or announcements on Yahoo, Seeking alpha, etc. 

 

Is this just random trade activity? Or was something released? 

 

There's a reasonable chance that the dilution is quite modest if they are released in 2024 after building capital for 3 more years combined with a new more utility-like capital rule -- FnF could be selling the re-IPO at many many multiples of current prices.

Posted

Does anyone know what the remedy in the "implied covenant of good faith and fair dealing" case before Judge Lamberth is likely to be if the shareholders win? Would it be unwinding of the Third Amendment, some amount of compensation paid directly to the shareholders, or something else? And any idea how the amount of any compensation awarded to the common and jr. preferred shareholders would be calculated by the court (what would the court base the amount of the award on)?

Posted (edited)

No one knows for sure, of course, and judges have latitude in what constitutes equitable relief, but I hear some attorneys that are knowledgeable about the case think preferred shareholders are entitled to par value plus interest from the time of the breach, which was the beginning of 2013.

Edited by Wiggins
Posted (edited)
3 hours ago, Wiggins said:

No one knows for sure, of course, and judges have latitude in what constitutes equitable relief, but I hear some attorneys that are knowledgeable about the case think preferred shareholders are entitled to par value plus interest from the time of the breach, which was the beginning of 2013.

 

Fingers crossed, but given that the dividends are optional and both companies still had large obligations of treasury Sr preferred funding to pay under the original terms, I'm not terribly hopeful for the inclusion of dividend payments in any relief. 

 

Than again, maybe the judges will take pity on us and be punitive towards the government for dragging this shit out. 

Edited by TwoCitiesCapital

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