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Fannie And Freddie: Director Watt Should Exercise His Executive Powers
- Director Watt can use his executive powers to end the Net Worth Sweep.
- Director Watt does not report to the U.S. Treasury.
- Ending the Net Worth Sweep will eventually end the conservatorship.
- Since the Lamberth dismissal, the short interest in Fannie Mae and Freddie Mac has been skyrocketing.
- Investors short stock when they have strong conviction that the stock is overvalued and will fall.
- Combined the short interest is now over $140M, up from $40M a month before, increasing by roughly $100M.
Fannie And Freddie: Financial Disclosures Needed On Guarantee Fee Assets
- The total value of guarantee fee assets should be hedged.
- The total value of guarantee fee exposure should be disclosed.
- Mortgage servicing rights (MSRs) are comparable to guarantee fees.
- MSRs are carried at fair value under GAAP.
- Bob Corker would rather be run over by a train than speak with shareholders.
The Reason Fannie And Freddie Shares Are Rising Today
- Common Shares of Fannie and Freddie Rise After News of the Common Securitization Platform.
- Looser Lending Standards Announced by the Regulator Mean that Private Capital Needs to be Raised.
- FHFA has a Responsibility to Ensure Safety and Soundness of the System.
Ackman Bets On $100+ For Fannie And Freddie - New All-Time Highs
- If Fannie Mae and Freddie Mac were not bailed out, their book value starts at $31/share.
- Treasury takeover forced Fannie and Freddie to pay interest on accounting losses that Treasury triggered that were not necessary as evidenced by reversals.
- Federal regulators directed Fannie Mae and Freddie Mac to start purchasing $40 billion a month of underperforming mortgage bonds to bail out America.
- Ackman says that he expects the share value to be $23-$47, but opportunity cost with preferreds and risk profile demonstrate otherwise.
- Losses were overstated, due to Treasury involvement.
- Equity book value would be about $31 per share, without the bailout.
- Treasury knows that the evidence is damaging to the financial markets.
- Judge Sweeney agrees that discovery documents could damage the financial system.
Fannie And Freddie: Elegant Solutions After Imprudent Actions
- Everything should be made as simple as possible, but not simpler.
- Bailout terms for banks amounted to free money.
- Victims of poor lending standards paid the most.
- Many things that seemed prudent at the time turned out to be imprudent.
- Paulson rejected a substantial offer from Chinese investors.
- Both GSEs are back to being profitable, and are still providing the backbone of the U.S. mortgages market with their 30-year mortgage.
- But shareholders cannot see even a penny from the profits, as the U.S. government enacted a controversial Sweep Amendment that striped both organizations of their profits.
- This action spurred a huge backlash and major investors are now suing the FHFA and the Treasury. If they succeed, both Fannie and Freddie could unlock huge profits.
- Knee jerk reactions to negative headlines are never good.
- Takings has not occurred yet, according to Lamberth.
- Shareholder rights continue to exist, despite the negative rhetoric.
- A U.S. judge has thrown out two Fannie Mae/Freddie Mac lawsuits and dealt investors a blow.
- Shares of Fannie Mae and Freddie Mac collapsed as a result.
- Is it still worth it clinging to the long investment thesis after this week's court ruling?
Fannie Mae Ruling Means Ackman's Valuation Is Now $100-$250
- The ruling revealed that the government is following all of its laws and will be revealing Fannie and Freddie to private shareholders.
- The government is signaling that the warrants are going to be cancelled for anyone who actually reads filings and understands what is going on.
- No takings have occurred yet. Another amendment is to follow. The entities are in conservatorship and not receivership. The stock continues to trade.
Fannie Mae And Freddie Mac: The Bill Ackman Perspective And Huge Return Potential
- What to do with Fannie Mae and Freddie Mac is an extremely polarizing and stratified topic in Washington.
- Pershing Square's Bill Ackman has concluded, with extensive research to support it, that a private entity isn't viable without a significant increase in cost to insure MBS.
- Even with the dilutive effect of exercising warrants, the Government stands to rake in approximately $600 billion on $190 billion invested. Estimated fair market value of $23-$47 a share.
- Lawsuits are progressing through the courts. Positive strides for the investors, but far from winning their freedom from the government.
- $5.4 billion in dividends from the Second Quarter, 2014 will be paid to the U.S. Treasury.
- Expect increased regulations on GSEs and all financial companies.
- Betting on Fannie and Freddie remain a high risk/high reward investment.
Fannie Mae & Freddie Mac: A Risk Worth Taking
- Fannie Mae and Freddie Mac seem much more likely to remain operational, as governmental regulators have indicated that they have no superior alternative.
- The Fannie Mae and Freddie Mac investor lawsuit against the Treasury Department is already strong, and seems even more promising as it attracts national attention and rallies prominent lawyers, activists.
- Our self-learning algorithm has a strong bullish signal for Fannie Mae and Freddie Mac in the 3-month and 1-year time horizons.
- Their diminishing risk and huge potential make Fannie Mae and Freddie Mac attractive investments.
- The Third Amendment Net Worth Sweep is illegal.
- Fannie Mae and Freddie Mac have paid back more than they borrowed.
- The largest investor in Fannie Mae and Freddie Mac is the American taxpayer.
- The largest beneficiary of Fannie Mae and Freddie Mac is the American taxpayer.
- Fannie Mae and Freddie Mac saved America during the crisis and are the best solution going forward.
Solutions For Fannie And Freddie's Future, But Profits Still Go To The Government
- No timeline for a resolution will continue to push all profits to federal government.
- Congress halts efforts on bills for mid-term elections.
- 20 lawsuits continue with no end in sight.
- Investor hopes spur the buying and selling.
Fri, Nov. 21, 2:12 AM
- Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) have revised their representation and warranty framework in response to lender concerns about the risk on buying back loans sold to the two agencies.
- Fannie says it can now only seek a mortgage repurchase if it determines the failure to comply would undermine its rights on the loan, result in a liability for the company or if the lender violated a consumer protection law or regulation. Freddie has made similar changes.
Wed, Nov. 19, 11:50 AM
- "Everyone agrees that conservatorship cannot continue forever," says Senator Tim Johnson in prepared remarks for a Senate Banking Committee hearing on the GSEs. "If Congress cannot agree on a smooth, more certain path forward, I urge you, (FHFA) Director Watt, to engage the Treasury Department in talks to end the conservatorship.”
- Watt: "Conservatorship cannot, should not be a permanent state."
- Fannie Mae (OTCQB:FNMA +10.6%), Freddie Mac (OTCQB:FMCC +9%)
Thu, Nov. 6, 10:13 AM
- Freddie Mac (OTCQB:FMCC -2.7%) Q3 comprehensive income of $2.8B vs. $1.9B in Q2, with $1.3B less of derivatives losses in Q3 and $800M more income of legal settlements.
- Based on end-of-quarter net worth of $5.2B, Freddie's dividend payment to Treasury will be $2.8B, bringing total paid to $91B vs. $72.3B in draws.
- Previously: Freddie Mac beats beats on revenue
- Previously: Fannie Mae total payments to Treasury to rise to $134.5B
Thu, Nov. 6, 8:28 AM
Tue, Oct. 21, 4:46 AM
- The nation’s chief housing regulator, Mel Watt, announced a new program Monday which will allow more home-buyers to get loans at lower rates and with much smaller down payments.
- The program will also attempt to reassure banks that have had to pay tens of billions of dollars to settle legal cases arising from the housing boom and bust and buy back bad loans sold to Fannie (OTCQB:FNMA) and Freddie (OTCQB:FMCC).
- "We know this issue has contributed to lenders’ imposing credit overlays that drive up the cost of lending,” announced Watt.
Fri, Oct. 17, 12:20 PM
- One of the key issues serving as a road block to mortgage lending is banker fear over having any loans put back to them by the GSEs at any time - even years down the road - for any number of reasons.
- This concern was voiced most pointedly in the late summer by Wells Fargo (WFC +1.2%) CEO John Stumpf in the kind of call-out of regulators you don't often hear from corporate leaders.
- The WSJ is now reporting that Fannie (OTCQB:FNMA +5.9%), Freddie (OTCQB:FMCC +7.3%), their regulators, and banks are near a deal in which the lenders could feel protected enough to begin granting mortgages to those without perfect credit and employment histories.
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, SEF, IYG, FXO, FNCL, FINU, RWW, RYF, FINZ
Mon, Oct. 13, 8:58 AM
- "The cash that we've raised we intend to use for a new commitment," says Bill Ackman tells Bloomberg following the European IPO of Pershing Square Holdings. "We have a new investment we're going to announce probably in the next 45-60 days."
- "We bought a lot more Fannie (OTCQB:FNMA) and Freddie (OTCQB:FMCC) stock in the week or so since the adverse court decision ... I think we increased our position by about 20%." Ackman finds it interesting Judge Lamberth weighed in on the taking plan even though it's out of his court's jurisdiction.
- "I think a new board will likely be installed at that date," says Ackman of Allergan (NYSE:AGN) and the December 18 shareholder meeting. He thinks it highly remote that he won't be able to vote his 9.7% stake in the company.
Fri, Oct. 10, 8:21 AM
- "Fairholme believes strongly that the Net Worth Sweep imposed four years after the financial crisis was not authorized by the Housing and Economic Recovery Act of 2008 and must be unwound," says the fund company, announcing the filing of an appeal of Judge Royce Lamberth's dismissal of lawsuits against the government over the GSEs.
- "Fairholme also believes strongly that the FHFA has contractual and fiduciary duties to the preferred shareholders of Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC), and that these duties can and will be enforced."
- Press release
- Previously: Ackman adds to Fannie/Freddie bets
Fri, Oct. 10, 8:04 AM
- Bill Ackman has added to his 10% stake in Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) since the stocks got clobbered by a federal court ruling last week.
- The stocks have trimmed losses after dropping almost 50% when Judge Royce Lamberth threw out lawsuits by Fairholme Capital and Perry Capital, who claimed Washington improperly seized their property by changing the terms of its agreement with them.
Fri, Oct. 3, 1:09 PM
- "The district court's decision overlooks important points of law and improperly resolved key questions of fact based on the government's cherry-picked record," says Perry Capital attorney Ted Olson. "The merits of this case deserve to be heard in court."
- Previously: Carney: Don't buy the dip in Frannie
- Fannie Mae (OTCQB:FNMA +20.2%), Freddie Mac (OTCQB:FMCC +20.3%)
Thu, Oct. 2, 9:59 AM
- The 52-page ruling from U.S. District Judge Royce Lamberth "meticulously demolishes" every argument made by investors claiming Treasury and the FHFA acted illegally when altering Fannie Mae's (OTCQB:FNMA -10%) and Freddie Mac's (OTCQB:FMCC -7.3%) bailout agreement in 2012.
- The new agreement, says Lamberth, is clearly within the bounds of authority Congress granted in 2008 when passing a law overhauling oversight of the GSEs.
- Yes, Lamberth's ruling doesn't directly affect the dozens of other pending lawsuits, but now plaintiff's attorneys will have to start out explaining how Lamberth got things wrong.
- Previously: Fannie and Freddie plunge after investor lawsuit dismissed
Wed, Oct. 1, 9:46 AM| 15 Comments
Wed, Oct. 1, 4:41 AM
- A group of Wall Street investors lost their legal challenges yesterday over the treatment of Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) shareholders after their bailout in 2008.
- The investors sued for breach of contract over allegedly promised dividends and liquidation preferences, and what they called an illegal “taking” of their profits by the U.S. Treasury.
- The lawsuits are among the first of almost 20 related cases to be decided.
Fri, Aug. 29, 2:01 AM
- Bank of America (NYSE:BAC) has asked Judge Jed Rakoff to dismiss the jury verdict which found its Countrywide unit guilty of past mortgage fraud that resulted in a $1.3B penalty.
- Known as the "hustle" case, the lawsuit accuses BofA of selling toxic mortgages to Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC), although the bank argues that the evidence at the trial does not support the claims.
- The motion comes just one week after BofA agreed to a record $16.7B settlement with the U.S. government to settle charges over its role in mortgages leading up to the financial crisis.
Wed, Aug. 27, 10:27 AM| 10 Comments
Mon, Aug. 18, 1:23 PM
- Assume, says John Carney, Bill Ackman and other investment managers win their legal battle against the government over Fannie Mae (OTCQB:FNMA -1%) and Freddie Mac (OTCQB:FMCC -0.8%). At that point, we go back to the bailout agreements under which both would still be obligated to pay a 10% dividend. Also, both would need to pay a commitment fee of, say, one-half to one percent, an amount they would struggle to be able to afford.
- The result is the two would have an even tougher time building a capital buffer, meaning a time frame of years before their earnings power could accrue to holders of either the preferred or common stock.
- Previously: Carney: Fannie and Freddie investors should surrender
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