Mar. 11, 2014, 3:52 PM
- "While I strongly support GSE reform that protects taxpayers, such efforts should also be mindful of investors," says Senator Pat Toomey, sticking up for preferred and common stockholders of Fannie Mae (FNMA -30.6%) and Freddie Mac (FMCC -27.5%) in wake of a proposed bill to wind down the GSEs.
- "Taxpayers should be fully compensated, but once they are, investors ... should not be denied their fair share of any remaining value."
- "The government¹s actions with respect to the GSEs' profits raise serious concerns, including whether these actions lawfully respect the rights and interests of all Americans."
- Previous: Fannie and Freddie plunge on wind-down proposal.
Mar. 11, 2014, 3:06 PM
- In one of the great delayed reactions of recent times, Fannie Mae (FNMA -39%) and Freddie Mac (FMCC -36.4%) plunge in wake of the proposed bipartisan Senate bill calling for their wind-down. Like Wile E. Coyote after running off the edge of a cliff, the stocks hung around in positive territory for a couple of hours after the news hit ... then they looked down.
- The Fannie "S" series preferred is off 9.9%, Freddie's is down 18.5%.
Mar. 11, 2014, 12:57 PM
- Buying low and selling high in the GSEs continues unabated as a long-awaited bipartisan Senate bill is introduced to continue government backing of mortgages, but wind down Fannie Mae (FNMA +4.5%) and Freddie Mac (FMCC +4.7%).
- The White House: “We support this effort and believe it is a workable bipartisan approach to complete the biggest remaining piece of post-recession financial reform.”
- A bill in the more conservative House would more or less cut the government out of housing finance. With elections months away, the chance of any sort of reform becoming law this year are probably slim.
Mar. 10, 2014, 12:45 PM
- "Total nonsense," says Bruce Berkowitz of Treasury's claim that 2012's altering of the Fannie (FNMA +4.1%) and Freddie (FMCC +3.3%) bailout - in which regular dividends were scrapped in favor of the "profit sweep" - was necessary because at the time it was worried the two couldn't earn enough to make the payments (a forecast the improving housing market has made wrong).
- Berkowitz's reading of the original bailout says the GSEs could have issued more stock to Treasury in lieu of cash, and he's' scratching his head as to how both the government and the GSEs failed to know this. Conspiracy? “I prefer the simpler reason that no one bothered to read the agreement.”
- Another reason is government lawyers' reading of the documents differs with Berkowitz. Ultimately, a judge will probably decide.
- Separately, how going long Fannie and Freddie became the latest version of The Greatest Trade Ever.
Mar. 4, 2014, 12:15 PM
- "I am confident that the Board is doing its job," says Fannie Mae (FNMA +3.3%) Chairman Phillip Laskawy, responding to Bruce Berkowitz's letter from yesterday demanding the GSEs begin retaining earnings to rebuild capital, and stop borrowing to pay voluntary dividends to Treasury.
- "FHFA has retained certain authorities for its exclusive determination and control, as provided by federal statute, including all decisions relating to the declaration and payment of dividends to the United States Treasury. Our Board and management will continue to perform their duties, as provided by federal statute and delegated by FHFA, diligently and to the best of their abilities," continues Laskawy in a long version of saying Fannie will continue to take orders from the government (Freddie Mac (FMCC +1.6%) too, no doubt).
- Press release
Mar. 3, 2014, 8:35 AM
- "The conservatorship of Fannie Mae (FNMA) and Freddie Mac (FMCC) - now in its sixth year - is perpetuating the pre-crisis regulatory and management shortcomings of the companies,” says Bruce Berkowitz in letters sent to the companies' boards. Berkowitz requests both companies conserve assets, retain earnings to build capital, and stop borrowing for the purpose of paying dividends to Treasury.
- He also wants the boards to begin holding annual shareholder meetings and to relist the stocks on the NYSE to ensure more orderly and transparent trading.
- FNMA -6.3% premarket
Feb. 26, 2014, 2:49 PM
- It doesn't take much to get these names moving, and Fannie Mae (FNMA +10.1%) and Freddie Mac (FMCC +10.3%) rocket higher, with Dick Bove appearing on Fox Business saying both are $18 stocks appearing to be today's catalyst.
- Bove has been bullish on the companies for awhile, but the $18 price target is a new item.
- Last week: Fannie reports big profit; Treasury paid back and more
Feb. 21, 2014, 8:42 AM
- Q4 net income of $6.5B brings full year net income to $84B, aided by the release of the valuation allowance on the DTAs.
- "While Fannie Mae (FNMA) expects to be profitable for the foreseeable future, the company does not expect to repeat its 2013 financial results, as those results were positively affected by the release of the company’s valuation allowance against its deferred tax assets, a significant increase in home prices during the year, and the large number of resolutions the company reached relating to representation and warranty matters and servicing matters."
- The company will pay Treasury $7.2B in dividends in March, bringing the total to $121.1B vs. draws of $116.1B.
- Full report
Feb. 21, 2014, 8:31 AM
Jan. 26, 2014, 1:51 AM
- The Department of Justice and the Commodity Futures Trading Commission have investigated Bank of America (BAC) for possible improper trading by carrying out futures trades for its own purposes before executing large orders for clients.
- The probes were disclosed in June, but have only just been reported. They appear to shed light on an FBI bulletin in which the agency said it suspects traders at two unnamed banks of conspiring to manipulate rates on major orders from Fannie Mae (FNMA) and Freddie Mac (FMCC), and of front running the government-sponsored enterprises (GSEs) in the markets for interest-rate swaps.
Jan. 16, 2014, 3:32 AM
- The number of foreclosure filings dropped to the lowest level since 2007 last year, declining 26% to 1.36M properties, RealtyTrac says. The figure is less than half of the peak of 2.9M properties in 2010.
- States with the highest foreclosure rates in 2013 were Florida, Nevada, Illinois, Maryland and Ohio.
- The number of foreclosure processes started plunged 33% to 747,728, the lowest since RealtyTrac began tracking the data in 2006. Bank repossessions plummeted 31% to 462,970 properties, the least since 2007. (PR)
- Relevant tickers: PHM, MHO, TOL, KBH, RYL, HOV, SPF, FNMA, FMCC
- ETFs: ITB, XHB, MBB, MBG, VMBS, CMBS, COBO
Jan. 14, 2014, 5:02 AM
- The FBI suspects traders at two unnamed banks of conspiring to manipulate rates on major orders from Fannie Mae (FNMA) and Freddie Mac (FMCC) or of front running the government-sponsored enterprises (GSE) in the markets for interest-rate swaps.
- Front running is using advanced knowledge of an order to make a transaction first.
- Senior management at the banks "planned and encouraged this behavior because it led to higher revenue for their respective parent banks," an FBI bulletin says.
- However, the agency isn't confident it can prosecute, because the transactions involved appear to be legitimate.
Jan. 2, 2014, 1:05 PM
- Six major banks settled mortgage related lawsuits (and one - Wells - settled without being sued) with Fannie (FNMA -1.5%) and Freddie (FMCC -2.8%) last year, allowing the GSEs to collect a total of $7.9B, according to their regulator, the FHFA.
- Twelve lawsuits are outstanding and the next case scheduled for court isMerrill Lynch in June, though analysts expect this and the others to be settled before a judge or jury hears them. Of the remaining suits, Bank of America faces the largest potential tab - the FHFA wants at least $6B to settle (with suits against the bank itself and Countrywide joining Merrill).
Dec. 30, 2013, 12:02 PM
- Wells Fargo (WFC) is the latest to settle with one of the GSEs, agreeing to settle repurchase claims on mortgages sold to Fannie Mae (originated prior to 2009) for $591M. Wells will write a check to Fannie for $541M after adjustments for credits related to certain prior repurchases.
- Wells has fully reserved for the cost of the agreement.
- “We have closed out our legacy repurchase reviews with this agreement with Wells Fargo,” says Fannie Mae (FNMA +0.3%) CEO Timothy J. Mayopoulos. “This agreement represents a fitting conclusion to our year of hard work to put legacy issues in the rear view mirror and begin 2014 focused on improving the future of housing finance.”
- Press release
Dec. 21, 2013, 9:16 PM
- Mel Watt wastes little time putting his stamp on housing policy, saying he will delay the increase in mortgage fees announced earlier this month by the FHFA - the regulatory agency overseeing Fannie Mae (FNMA) and Freddie Mac (FMCC). Watt was confirmed to lead the FHFA on December 10 and is set to be sworn in on January 6.
- The move to boost fees - which would have led to significantly higher rates and/or points to those with anything but perfect credit and 20% to put down - was part of a plan by outgoing chief Ed DeMarco to allow room for money from private investors into the mortgage market. Needless to say, it had come under strong attack from those whose bread is buttered by the current regime. "The timing of it is impeccably bad," said Lew Ranieri. "All this will do is tighten credit. You're just making housing less affordable."
- "What our industry keeps pushing for is let's do things at a slow pace to make sure there's not some unintended consequence," said KB Home (KBH) CEO Jeff Mezger on the company's earnings call (transcript) this week (before Watt nixed the fee increase). "If you're a 750 FICO, this [extra fee] is 1/8 of a percentage point, so it's not a big deal. You get down to a 650 or a 670 or 680 - which historically is a good buyer - and your interest rate could go up 1%."
- "There's a new head of FHFA coming in," continued Mezger. "They'll have the ability to go adjust and monitor things." Indeed.
- Related ETFs: XHB, ITB
Dec. 17, 2013, 1:17 PM
- A continuing absence of refinancing activity could have mortgage origination volumes off as much as 30% in 2014, say KBW's Bose George and Jade Rahmani, even as purchase volumes rise more than 10%. Their forecast of $1.15T in total activity next year is $50B less than the MBA's estimate, and against about $1.8T in 2013.
- For the mortgage sector: Decline earnings from originators and title insurers, stability for the servicers, and increasing earnings for the insurers.
- The mortgage insurers - RDN, MTG, ORI, ESNT, NMIH, GNW - will benefit not only from the rise in purchase activity, but from an FHA continuing to cede more market share to the private players.
- The team is also bullish on owners of MSRs like Home Loan Servicing Solutions (HLSS) and New Residential (NRZ -0.3%), but neutral on Ocwen (OCN +0.7%) after a big run this year.
- KBW also continues to believe the common stock of Fannie (FNMA -0.4%) and Freddie (FMCC +0.8%) is worthless and reform of the GSEs isn't coming until at least 2015.
FNMA vs. ETF Alternatives
Fannie Mae is a government-sponsored enterprise that was chartered by Congress in 1938 to support liquidity, stability and affordability in the secondary mortgage market, where existing mortgage-related assets are purchased and sold.
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