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

[Flynnstone5]

http://seekingalpha.com/article/4045788-fannie-mae-earnings-mnuchin-confirmed-get-surprise?app=1&auth_param=dkhti:1ca69rc:3cf4210c2d67bdd73acd4f00e3835aa9&uprof=51

[Luke 532]

http://seekingalpha.com/article/4045788-fannie-mae-earnings-mnuchin-confirmed-get-surprise?app=1&auth_param=dkhti:1ca69rc:3cf4210c2d67bdd73acd4f00e3835aa9&uprof=51

 

Good article, and I don't usually say that about SA.

Furthermore, Fannie Mae is set to report earnings on Friday of this week. We are going to be watching extremely carefully as the company reports. Members of Trump's administration have commented that Fannie and Freddie are near first on the list for Mnuchin to take care of as Secretary of Treasury, and we can't help but wonder if we are going to possibly get news about the fate of the net worth sweep as early as Friday of this week.

[Guest cherzeca]

http://seekingalpha.com/article/4045788-fannie-mae-earnings-mnuchin-confirmed-get-surprise?app=1&auth_param=dkhti:1ca69rc:3cf4210c2d67bdd73acd4f00e3835aa9&uprof=51

 

Good article, and I don't usually say that about SA.

Furthermore, Fannie Mae is set to report earnings on Friday of this week. We are going to be watching extremely carefully as the company reports. Members of Trump's administration have commented that Fannie and Freddie are near first on the list for Mnuchin to take care of as Secretary of Treasury, and we can't help but wonder if we are going to possibly get news about the fate of the net worth sweep as early as Friday of this week.

 

certainly for the last 10Qs that i have been watching, whenever GSEs announced quarterly earnings, they announced at that time the amount of the dividend that would be made in respect of that quarter.  so even silence on the dividend amount would be a welcome change

[merkhet]

Mnuchin just got sworn in, it's official.

 

Now it's just a matter of playing the GOP Congress against Mel Watt & vice versa. Fat lady hasn't sung yet, but she's warming up.

 

i think GOP congress is plenty distracted with everything on its plate as it is, and watt reminds me of the kid with a glove at the park who asks if anyone wants to play ball with him

 

lol

 

Well, I think Mnuchin needs Watt or Congress or both (but that may be unlikely). In this situation, he can push for what he wants by basically going to each and saying "look, give me X or I'm just going to go to Watt/Congress and get what I want without you."

[waynepolsonAtoZ]

"so even silence on the dividend amount would be a welcome change."

 

Not pestering you. However, FnF have to follow the SPSPAs including the 3rd Amendment until some time when there is a new 4th Amendment.

 

God only knows. http://ew.com/music/2017/02/13/john-legend-cynthia-erivo-god-only-knows-grammys/

[SnarkyPuppy]

I'd imagine the quarterly financials have already been prepared and the auditors have largely performed their quarterly reviews.  Is it rally likely they'll go through the process of modifying the Q ~3 days before reporting?

 

In other words, seems unlikely to me that Mnuchin can/would just call up FNMA executives and ask them to change their SEC reporting 3 days before filing..?

[Midas79]

I'd imagine the quarterly financials have already been prepared and the auditors have largely performed their quarterly reviews.  Is it rally likely they'll go through the process of modifying the Q ~3 days before reporting?

 

In other words, seems unlikely to me that Mnuchin can/would just call up FNMA executives and ask them to change their SEC reporting 3 days before filing..?

 

If it only involves deleting one sentence it's possible.

 

But I agree that large changes this late in the quarter are unlikely. I'm not going to panic or even be disheartened if the language about the dividends is in the 10-Q.

[Guest cherzeca]

"so even silence on the dividend amount would be a welcome change."

 

Not pestering you. However, FnF have to follow the SPSPAs including the 3rd Amendment until some time when there is a new 4th Amendment.

 

God only knows. http://ew.com/music/2017/02/13/john-legend-cynthia-erivo-god-only-knows-grammys/

 

GSEs dont have to declare and pay dividends.  first rule of delaware corp law is that the board has authority to refrain from declaring dividends. then it is up to the security docs to determine whether dividend accrues and compounds or is omitted

 

 

[hardincap]

looks like we can see those protected docs soon http://www.glenbradford.com/wp-content/uploads/2017/02/perry1.pdf

[investorG]

looks like we can see those protected docs soon http://www.glenbradford.com/wp-content/uploads/2017/02/perry1.pdf

 

motion was UNOPPOSED

 

meaning the DOJ has a new sheriff in town

 

there is a lot of excitement about these 4 perry filings tonight.

 

would you mind explaining why it's so important?  isn't it just some of the 48 documents that they needed to turn over anyway post-mandamus ruling?

 

thank you

[beaufort]

How long for a consent desk order to be pronounced by the court and take effect?

[Guest cherzeca]

looks like we can see those protected docs soon http://www.glenbradford.com/wp-content/uploads/2017/02/perry1.pdf

 

motion was UNOPPOSED

 

meaning the DOJ has a new sheriff in town

 

there is a lot of excitement about these 4 perry filings tonight.

 

would you mind explaining why it's so important?  isn't it just some of the 48 documents that they needed to turn over anyway post-mandamus ruling?

 

thank you

 

i deleted my prior comment.  it seems that DOJ is still resisting some motions.  i dont know why sessions doesnt go into DOJ civil offices and start taking names...

[REDACTED]

looks like we can see those protected docs soon http://www.glenbradford.com/wp-content/uploads/2017/02/perry1.pdf

 

motion was UNOPPOSED

 

meaning the DOJ has a new sheriff in town

 

there is a lot of excitement about these 4 perry filings tonight.

 

would you mind explaining why it's so important?  isn't it just some of the 48 documents that they needed to turn over anyway post-mandamus ruling?

 

thank you

 

The important part of the motion regarding the 48 documents is that they are to be unsealed. Meaning available for other plaintiffs, available to the media, and available to us.

 

This motion was unopposed.

[investorG]

looks like we can see those protected docs soon http://www.glenbradford.com/wp-content/uploads/2017/02/perry1.pdf

 

motion was UNOPPOSED

 

meaning the DOJ has a new sheriff in town

 

there is a lot of excitement about these 4 perry filings tonight.

 

would you mind explaining why it's so important?  isn't it just some of the 48 documents that they needed to turn over anyway post-mandamus ruling?

 

thank you

 

The important part of the motion regarding the 48 documents is that they are to be unsealed. Meaning available for other plaintiffs, available to the media, and available to us.

 

This motion was unopposed.

 

oh, wow, that is interesting.  so in theory most of the 12k documents should at some time become public, rather than just viewed by the lawyers. 

 

thank you

[hardincap]

i deleted my prior comment.  it seems that DOJ is still resisting some motions.  i dont know why sessions doesnt go into DOJ civil offices and start taking names...

 

on feb 8, fhfa filed with the court opposing fairholme's request to present more discovery materials

on feb 9, counsel for usg agreed to remove "protected information" designations

 

pretty inconsistent, no? sessions was confirmed feb 8

[Guest cherzeca]

i deleted my prior comment.  it seems that DOJ is still resisting some motions.  i dont know why sessions doesnt go into DOJ civil offices and start taking names...

 

on feb 8, fhfa filed with the court opposing fairholme's request to present more discovery materials

on feb 9, counsel for usg agreed to remove "protected information" designations

 

pretty inconsistent, no? sessions was confirmed feb 8

 

interesting, hardincap.  let's see how this plays out.  i would think DOJ becomes less adversarial, but that may be wishful

[hardincap]

agreed, winds seem to be shifting at the doj but id like to see more evidence before reaching any conclusions

[Seahug]

Are we sure there's something in the 48 documents or it's an assumption because they wanted to restrict access?

 

In DJT's shoes, even wanting gse release, I would continue pressing the plaintiffs so there's incentive to settle. Also I would continue NWS/litigation unless prefs/common agree to a restructuring plan which may include conversion of pref's to equity.

 

Under Basel III, minimum T1 common equity is 4.5% and total T1 is 6%. Since the prefs were issued prior to Basel III guidelines, it's possible they need to be called anyway (which I've seen).

 

From Shearman & Sterling http://www.shearman.com/~/media/Files/NewsInsights/Publications/2011/03/The-New-Basel-III-Framework-Implications-for-Ban__/Files/View-full-memo-The-New-Basel-III-Framework-Impli__/FileAttachment/FIA033011The_new_Basel_III_framework__Implicatio__.pdf

 

Additional Tier 1 instruments: In addition to common equity, Tier 1 capital includes certain non-common subordinated

instruments with fully discretionary non-cumulative dividends or coupons. So-called Additional Tier 1 instruments must be

perpetual, i.e., without a maturity date and precluding any incentives to redeem. In January, the Basel Committee

pronounced that Additional Tier 1 instruments, if issued by internationally active banks, must be convertible to common

equity or be written off at the point that an institution would become non-viable without state support.23 In addition, any

Tier 1 instruments that are classified as liabilities for accounting purposes must include a similar conversion or write-off

feature.

 

In any case 4.5% of $3tn (FNMA) = $135bn common vs 4bn now. Some ways to go even if we assume some ipo, pref conversion, net income retention.

[investorG]

Are we sure there's something in the 48 documents or it's an assumption because they wanted to restrict access?

 

In DJT's shoes, even wanting gse release, I would continue pressing the plaintiffs so there's incentive to settle. Also I would continue NWS/litigation unless prefs/common agree to a restructuring plan which may include conversion of pref's to equity.

 

Under Basel III, minimum T1 common equity is 4.5% and total T1 is 6%. Since the prefs were issued prior to Basel III guidelines, it's possible they need to be called anyway (which I've seen).

 

From Shearman & Sterling http://www.shearman.com/~/media/Files/NewsInsights/Publications/2011/03/The-New-Basel-III-Framework-Implications-for-Ban__/Files/View-full-memo-The-New-Basel-III-Framework-Impli__/FileAttachment/FIA033011The_new_Basel_III_framework__Implicatio__.pdf

 

Additional Tier 1 instruments: In addition to common equity, Tier 1 capital includes certain non-common subordinated

instruments with fully discretionary non-cumulative dividends or coupons. So-called Additional Tier 1 instruments must be

perpetual, i.e., without a maturity date and precluding any incentives to redeem. In January, the Basel Committee

pronounced that Additional Tier 1 instruments, if issued by internationally active banks, must be convertible to common

equity or be written off at the point that an institution would become non-viable without state support.23 In addition, any

Tier 1 instruments that are classified as liabilities for accounting purposes must include a similar conversion or write-off

feature.

 

In any case 4.5% of $3tn (FNMA) = $135bn common vs 4bn now. Some ways to go even if we assume some ipo, pref conversion, net income retention.

 

 

the denominator in the capital equation may be risk weighted assets rather than total assets, which would likely reduce by ~half.

 

the real tim howard says 70bn base case capital needed with 100bn on the high side.  i don't see how any of us could know more than him.

[onyx1]

i deleted my prior comment.  it seems that DOJ is still resisting some motions.  i dont know why sessions doesnt go into DOJ civil offices and start taking names...

 

on feb 8, fhfa filed with the court opposing fairholme's request to present more discovery materials

on feb 9, counsel for usg agreed to remove "protected information" designations

 

pretty inconsistent, no? sessions was confirmed feb 8

 

interesting, hardincap.  let's see how this plays out.  i would think DOJ becomes less adversarial, but that may be wishful

 

I'm left wondering if Session's DOJ will soon lead the Perry panel toward a reversal.  Sounds crazy, yes.  But a ruling against the government would:

 

1. provide political cover against the "hedge fund giveaway narrative",

2. blunt congressional opposition,

3. speed along a settlement,

4. allow a jump ahead toward recapitalization negotiations.

 

This whole issue is complicated by the looming cut in the corporate tax rate, which would reduce the GSE's DTA valuation and force a government draw.  A quick resolution of the mortgage giants would avoid this scenario, and a Perry reversal would move things along.

 

 

 

[Flynnstone5]

i deleted my prior comment.  it seems that DOJ is still resisting some motions.  i dont know why sessions doesnt go into DOJ civil offices and start taking names...

 

on feb 8, fhfa filed with the court opposing fairholme's request to present more discovery materials

on feb 9, counsel for usg agreed to remove "protected information" designations

 

pretty inconsistent, no? sessions was confirmed feb 8

 

interesting, hardincap.  let's see how this plays out.  i would think DOJ becomes less adversarial, but that may be wishful

 

I'm left wondering if Session's DOJ will soon lead the Perry panel toward a reversal.  Sounds crazy, yes.  But a ruling against the government would:

 

1. provide political cover against the "hedge fund giveaway narrative",

2. blunt congressional opposition,

3. speed along a settlement,

4. allow a jump ahead toward recapitalization negotiations.

 

This whole issue is complicated by the looming cut in the corporate tax rate, which would reduce the GSE's DTA valuation and force a government draw.  A quick resolution of the mortgage giants would avoid this scenario, and a Perry reversal would move things along.

 

All true and not that crazy especially regarding #2, but who knows.

 

One of my hopes is that there are seriously damaging docs in terms of gov case, as well as, seriously damning docs regarding the Obama admin. internal deliberations, i.e. hypocrisy, lies, deceit. I think there is such bad blood now between Trump and dems. that he will take advantage of any opportunity to expose/damage their credibility.

[Midas79]

the denominator in the capital equation may be risk weighted assets rather than total assets, which would likely reduce by ~half.

 

the real tim howard says 70bn base case capital needed with 100bn on the high side.  i don't see how any of us could know more than him.

 

Tim Howard also assumes that the GSEs will have their own custom capital requirement and not be lumped in with the big banks. A 10% requirement for the GSEs would make a full recap basically impossible.

[Sunrider]

Haha ... i.e. What you should expect in Any admin? Whether one side or the other? I just hope this gets resolved before trump gets impeached for giving state secrets to Russia, taking money, or something like that.

 

i deleted my prior comment.  it seems that DOJ is still resisting some motions.  i dont know why sessions doesnt go into DOJ civil offices and start taking names...

 

on feb 8, fhfa filed with the court opposing fairholme's request to present more discovery materials

on feb 9, counsel for usg agreed to remove "protected information" designations

 

pretty inconsistent, no? sessions was confirmed feb 8

 

interesting, hardincap.  let's see how this plays out.  i would think DOJ becomes less adversarial, but that may be wishful

 

I'm left wondering if Session's DOJ will soon lead the Perry panel toward a reversal.  Sounds crazy, yes.  But a ruling against the government would:

 

1. provide political cover against the "hedge fund giveaway narrative",

2. blunt congressional opposition,

3. speed along a settlement,

4. allow a jump ahead toward recapitalization negotiations.

 

This whole issue is complicated by the looming cut in the corporate tax rate, which would reduce the GSE's DTA valuation and force a government draw.  A quick resolution of the mortgage giants would avoid this scenario, and a Perry reversal would move things along.

 

All true and not that crazy especially regarding #2, but who knows.

 

One of my hopes is that there are seriously damaging docs in terms of gov case, as well as, seriously damning docs regarding the Obama admin. internal deliberations, i.e. hypocrisy, lies, deceit. I think there is such bad blood now between Trump and dems. that he will take advantage of any opportunity to expose/damage their credibility.

[Flynnstone5]

@hardincap @cherzeca @merkhet

 

Any idea on how quickly court rules regarding unsealing and supplementing the record? Would this have a high probability of happening today or are we talking much longer?

 

Thanks in advance.

[rros]

Haha ... i.e. What you should expect in Any admin? Whether one side or the other? I just hope this gets resolved before trump gets impeached for giving state secrets to Russia, taking money, or something like that.

haha before this happens T's Treasury will move to label China a currency manipulator, create "an accident" in any of the South China sea man-made islands, initiate a trade war announcing possibly a large geopolitical conflict in which Russia will be our main ally. Then, both russian issues and impeachment talk will die.