Fannie Mae: The Government's Most Recent Motion To Dismiss And Fairholme's Motion To Stay
Charlie Harrison • 55 Comments
Charlie Harrison • 55 Comments
Mon, Sep. 19, 3:43 AM
- Global bond issuance is running at its fastest pace in nearly a decade as companies, countries and U.S. agencies such as Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) binge on debt in an era of historically low interest rates.
- According to Dealogic, a total of $4.88T of debt has been sold since the year began as issuers take advantage of rock-bottom borrowing costs.
- The figure is a hair below that of 2007, when $4.91T of bonds were issued during the same period.
Fri, Sep. 9, 3:57 PM
- A federal judge dismissed a case brought by an investor against the FHFA and Treasury over the 2012 change to the bailout agreement which resulted in the infamous profit sweep.
- The investor had argued her investments in Fannie Mae (OTCQB:FNMA -2.2%) and Freddie Mac (OTCQB:FMCC -1.2%) were damaged by the move. Similar lawsuits have been tossed by other federal courts, reports John Carney in the WSJ.
- In this case, the judge said the Housing and Economic Recovery Act (HERA) barred courts from interfering in the FHFA's authority as conservator of the GSEs.
- There remain, of course, a number of other suits brought by investors in Fannie Mae and Freddie Mac.
Thu, Aug. 11, 7:44 AM
- Last month's abrupt firing of Fifth Third Bancorp (NASDAQ:FITB) general counsel Heather Russell was due to a romantic relationship she was having with Fannie Mae (OTCQB:FNMA) CEO Timothy Mayopoulos.
- Source: WSJ
- Interestingly, both Russell and Mayopoulos disclosed the relationship to their respective companies, and while Fifth Third fired her for it, Fannie Mae had no issues with Mayopoulos.
- The two companies, of course, do plenty of business together, with Fannie Mae buying and securitizing Fifth Third mortgages. When mortgages go bad, the two negotiate over just how many the bank must repurchase.
- The two worked together previously when Mayopoulos was general counsel at Bank of America from 2004-2008, and Russell an associate general counsel from 2006-2011.
- Fifth Third’s code of ethics says “we all must avoid actual or apparent conflict of interest with Fifth Third or its customers, suppliers and vendors.”
Thu, Aug. 4, 8:06 AM
- That's the amount of comprehensive income the company earned in Q2, and compares to $936M of income in Q1.
- The increase in income last quarter is mostly thanks to a smaller decline in interest rates, higher credit-related income , and an increase in mortgage prepayments.
- After writing a check to Treasury for $2.9B, Fannie Mae (OTCQB:FNMA) will have paid a a total of $151.4B versus draws of $117B.
- Full earnings release
- Previously: Fannie Mae misses by $0.44, beats on revenue (Aug. 4)
Thu, Aug. 4, 7:36 AM
Tue, Jun. 21, 4:09 PM
- The class action plaintiffs have been ordered to submit supplemental briefs over a number of questions about the role of sovereign immunity, writes John Carney.
- While the questions don't necessarily mean the court is leaning towards the government in its verdict, he says, there are hints. Most notably, the requests were directed at the class action plaintiffs, not the individual ones. This could mean the court is not inclined to accept demands for injunctive relief over the 20112 change to the bailout terms for OTCQB:FNMA and OTCQB:FMCC.
- The questions may also suggest the court hasn't found any claims for jurisdiction persuasive (agreeing with the 2008 trial court).
- New briefs are due on July 1, and the government has until the 8th to respond.
Thu, Jun. 16, 4:19 PM
- The so-called Midtown Center in D.C. with spiral staircases, rooftop decks, and three glass-enclosed walkways, aren't exactly appropriate for an agency in conservatorship, reads an inspector general's report from the FHFA.
- Meanwhile, the cost for Fannie Mae's (OTCQB:FNMA) new 679K square-foot gleaming HQ has risen to $151M, up from $115M in January 2015 (when the FHFA approved the move). In all, the 15-year cost of relocation, the new building, and the lease now tops $770M.
- A Fannie spokesman figures the move will save taxpayers about $330M over the next 15 years thanks to space consolidation and energy efficiency.
- Fannie Mae will sell its current HQ on what could be primo residential property on Wisconsin Avenue.
Fri, May 20, 10:36 AM
- The unsealing of documents as part of the lawsuit filed by private investors against the government shows the decision about the 2012 profit sweep was not necessarily out of concern with protecting taxpayers from future losses.
- The change, according to an email from Jim Parrott, then a top White House official on housing finance, was structured to ensure Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) couldn't "repay their debt and escape as it were."
- Documents show the government moving quickly to put the sweep in place after the FHFA learned the GSEs were about to enter "the golden years" of profitability.
- The sweep, said Parrott, eliminated "the possibility that they ever go (pretend) private again."
- The significance of the documents, writes Gretchen Morgenson, goes well beyond the future of housing finance. "They demonstrate the perils of allowing the government to act in secrecy."
Thu, May 5, 7:32 AM
Fri, Apr. 15, 2:25 PM
- Investors today are presenting arguments to a federal appeals panel that the August 2012 net worth sweeps of Fannie Mae (OTCQB:FNMA -12%) and Freddie Mac (OTCQB:FMCC -13.8%) were illegal. There's no word publicly yet on how things went down, but the direction of the stocks may give a clue.
- Now read: Fannie Mae And Freddie Mac: A Generational Investment Opportunty (April 14)
Tue, Apr. 12, 1:21 PM
- In a deposition taken last summer, former Fannie Mae (OTCQB:FNMA +11.5%) CFO Susan McFarland recounts telling high-level Treasury officials on August 9, 2012 that the company was "now in a sustainable profitability," and a presentation now unveiled shows 10 years of internal projections indicating no need for further government assistance.
- Just over a week after that meeting, Treasury announced the profit sweep for Fannie and Freddie (OTCQB:FMCC +8.6%).
- McFarland, in last summer's deposition, says she believes that August 2012 meeting propelled the government to quickly change the terms of Fannie's and Freddie's bailouts to put in place the seizing of any profits.
- McFarland: "It was probably a desire not to allow capital to build up within the enterprises and not to allow the enterprises to recapitalize themselves.”
- Source: NYT
- Now read: Double Bind FHFA Legal Arguments Undermining Ownership Rights Set To Collapse (April 11)
Wed, Mar. 23, 4:01 PM
- Instead of winding down Fannie Mae (OTCQB:FNMA -1.3%) and Freddie Mac (OTCQB:FMCC -2%), the GSEs would be merged into a government-owned corporation with the responsibility of buying mortgages, creating MBS, and guaranteeing against default, writes Joe Light in the WSJ.
- It's a significant shift for some of the paper's five authors, which include key players in shaping the Obama administration's housing policy (and at least one economic advisor to Hilary Clinton).
- The new entity would be called the National Mortgage Reinsurance Corporation, and while investors would bear most of the risk of mortgage defaults, the government would guarantee the bonds got paid on time. The authors say the fees charged would be lower than the current system at times when investors wish to take on more risk, and higher when investors are more risk-averse.
- While the plan as written has little chance of gaining traction in this election year, it does set parameters for the debate going forward.
Tue, Mar. 15, 1:14 PM
- In what would its first such deal since the financial crisis, JPMorgan (NYSE:JPM) is looking to sell $1.9B in MBS, with most of the credit risk passed on to the buyers, as the bank would keep the safest tranches for itself and sell the riskier parts to investors searching for yield.
- Financial institutions issued $61.6B of private mortgage bonds last year vs. $1.19T issued at the peak of the bubble in 2005.
- This particular deal is a "house transaction" in which the MBS are entirely backed by mortgages (6K-plus) owned by the bank. While JPMorgan could have unloaded the paper to the GSEs (OTCQB:FNMA, OTCQB:FMCC), it clearly thinks it can do better by selling to private investors and/or holding on to some of it.
- Source: WSJ
Thu, Mar. 3, 4:22 PM
- In upholding a district court ruling that the GSEs are private companies, the 9th Circuit Court of Appeals may have just handed the Delaware GSE cases to the plaintiffs, writes Todd Sullivan.
- The defendants (the government) had argued that Fannie Mae (OTCQB:FNMA +6.8%) and Freddie Mac (OTCQB:FMCC +6.5%) are "federal instrumentalities," and thus federal law, not state law governs the conservator's power. Plaintiffs, on the other hand, argued the two are Delaware companies ruled by Delaware law, where the net worth sweep is illegal.
- "The government here," says Sullivan, "is between a rock and a hard place."
Sun, Feb. 21, 9:32 AM
- Fannie Mae (OTCQB:FNMA) is at risk of needing a government bailout that could shake up confidence in the housing finance market, FT reports.
- Because the government does not let Fannie Mae retain profits, its capital buffer (which has dwindled from $30B before the financial crisis to $1.2B today) is on track to disappear by January 2018.
- At that point it would be unable to weather quarterly losses and would need to draw on Treasury funds to avoid being placed into receivership.
- Options for solving the problem: Allowing Fannie to retain earnings, changing the terms on what gets Treasury support via preferred stock purchases, and taking it out of conservatorship so it could be recapitalized in another way.
Fri, Feb. 19, 8:06 AM| Fri, Feb. 19, 8:06 AM | 10 Comments