Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3005180 times)

allnatural

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10370 on: August 16, 2018, 06:27:44 PM »
What I found interesting about the Collin's decision is that the majority went to the extra effort of distinguishing FHFA from CFPB, claiming that FHFA has less oversight than the CFPB. So while they ruled that the FHFA was unconstitutional, the majority didn't seem to believe the same in regards to CFPB. I am not sure how the All American case is attempting to piggyback on the Collins decision when it might have actually weakened their argument? Regardless, it would be nice to see en banc review on either the separation of powers remedy issue, APA issue, or ideally both. Do you know when we should find out if the 5th circuit will agree to hear these issue(s) or not? Thank you

Additionally, I believe the FHFA/Government has until Aug 30 (45 days from the decision) to petition for en banc review or 90 days from the decision for scotus review on the constitutional issues. Will be interesting to see which way the government goes here if any?

@cherzeca

So as not to clutter up Tim Howard's blog, I'll ask my question about your recent post there regarding the unopposed en banc request in the All American case.

Collins will likely ask for a review of the NWS claim that was dismissed in addition to the Article II claim, and FHFA will surely oppose the NWS part of it. In your opinion, how likely is it that the 5th Circuit grants en banc on the NWS claims? I take it a review of the Article II claim can be separated from a review of the NWS claim, as in either separately or both could be reviewed without regard to the other.

excellent question.  I think all American's motion makes it incrementally more likely that 5th cir does not hear appeal of APA claim or hears it separately en banc, since that would be the non-common claim of any consolidated appeal.  just guessing though
« Last Edit: August 16, 2018, 06:31:22 PM by allnatural »


rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10371 on: August 16, 2018, 07:40:16 PM »
We may be underestimating the role of Brian Brooks.

At some point, his name made the circles as one possible Under Secretary of Treasury. According to Joe Light, he has actually become an unofficial emissary spearheading a specific housing goal straight from the inside. And we already know he is a Mnuchin's man.

Even if JL/Bloomberg aim is to undermine administrative action by exposing illegal lobbying, how likely are they to succeed when the most important congress actors are hitting the exit door and the appetite for a new, more stringent Jumpstart is probably missing? If Brian Brooks has really been knocking doors for months now maybe there is some sense of urgency somewhere in the administration. As in "no need to wait for another Congress".

"One GSE watcher..." Hah!  Might as well be me, but it wasn't.  Still funny how the narrative at IMF (i.e. David Stevens) has dramatically changed in recent months.  Brooks as CEO?  Yes, please.  Even if it doesn't happen the fact that IMF (Stevens) is testing the waters with this kind of stuff seems like a positive.

https://www.insidemortgagefinance.com/imfnews/1_1422/daily/-1000047236-1.html
One GSE watcher told us that Brian Brooks, who currently serves as Fannie Maes EVP, general counsel and corporate secretary, would make a good successor to departing company CEO Timothy Mayopoulos. However, this observer added: Hes not going to take a pay cut. Congress capped GSE CEO pay at roughly $600,000 per year. Before joining Fannie in November 2014, Brooks was vice chairman of OneWest Bank, a bank Treasury Secretary Steve Mnuchin once owned a stake in.
Things are beginning to take shape.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10372 on: August 16, 2018, 08:07:17 PM »
@allnatural

separate "FHFA/Government".  fhfa will want to appeal/seek en banc rehearing.  not so justice dept.

cfpb has not opposed initial en banc hearing in all American.  so seems to me that all American's motion helps collins in seeking rehearing en banc of the relief granted in separation of powers opinion since all parties (except maybe justice dept) will want it.

allnatural

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10373 on: August 17, 2018, 04:17:50 AM »
Do you know what remedy the All American case is seeking exactly? Is it similar to undoing a previous action while under a unconstitutional regime like the plaintiffs want with the NWS? If so that is indeed positive, assuming the 5th circuit takes up the issue.

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10374 on: August 17, 2018, 06:27:18 AM »
Do you know what remedy the All American case is seeking exactly? Is it similar to undoing a previous action while under a unconstitutional regime like the plaintiffs want with the NWS? If so that is indeed positive, assuming the 5th circuit takes up the issue.

Good point. If I understand (relevant part of) the SCOTUS Lucia case correctly, plaintiffs have the right to expect some sort of remedy on top of the courts just fixing the agency's structure to make it consitutional. If All American's desires are taken into account, hopefully Collins's wish for the NWS to be unwound is as well.

investorG

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10375 on: August 17, 2018, 07:24:23 AM »
I admire the board's residual hope that the courts will deliver for the minority shareholders but I don't see it happening.   Perhaps there's some small chance that the claims court rules it was a taking (a long time from now, including appeals) but the preferred shares were trading below $2 when the NWS was implemented and so the payout would likely be modest. 

Imo, in the end after all appeals / deals / etc..., no investor windfalls will be allowed by the collective government apparatus, especially given the hedge fund narrative.  The market is saying that loud and clear (and this is not an under-researched / inefficient investment among the smart hf community). 

At this point, I believe we're betting on the powers that be coming together offering a fair compromise where all parties get some but not near all of what they believe is fair.  In that hoped-for scenario, the warrants would almost certainly stand (rather than some random subjective sr pref conversion like Tim Rood suggests) and jr preferred would be either surrendered via voluntary tender or converted to common around 50-75pct of par, while the sr pref would be retired in line with the full original 10pct interest + principal payment conclusion.   The warrants can build the wall as Trump's backup plan if Congress doesn't fund it.

Good luck to everyone.  This scandal has been a disappointing yet mostly unnoticed blemish on our country and I truly hope that the current administration sees this as a real priority to quickly fix starting in about 3-5 months.  Thousands of Americans are counting on them to do the right thing. 

allnatural

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10376 on: August 17, 2018, 07:36:12 AM »
I think you are pretty spot on at this point. Owning the GSEs today is a bet that the admin will resolve the situation, not that we will win in court. What's interesting about the litigation is as you highlighted, no one gives it any weight these days and assigning close to zero probability for any favorable result (just look at the last 3 court cases we lost, almost zero price reaction). Meaning we may wake up one morning to a nice surprise (as low as a probability that may be...). There is also no denying that we are beginning to see a shift in the type of questioning the judges are beginning to ask the defendants (see Collins and Saxton). For example, when has a judge in oral argument blatantly concluded that this was a nationalization? That's not to lose focus of the purpose of the litigation. It's to let the government know we aren't going anywhere, and if we win one of these cases, lets do what's best for everyone and settle with a recap release that's beneficial to all parties involved (the government, the shareholders, and most importantly the American people/tax payers).

"So you're telling me there's a chance!"


I admire the board's residual hope that the courts will deliver for the minority shareholders but I don't see it happening.   Perhaps there's some small chance that the claims court rules it was a taking (a long time from now, including appeals) but the preferred shares were trading below $2 when the NWS was implemented and so the payout would likely be modest. 

Imo, in the end after all appeals / deals / etc..., no investor windfalls will be allowed by the collective government apparatus, especially given the hedge fund narrative.  The market is saying that loud and clear (and this is not an under-researched / inefficient investment among the smart hf community). 

At this point, I believe we're betting on the powers that be coming together offering a fair compromise where all parties get some but not near all of what they believe is fair.  In that hoped-for scenario, the warrants would almost certainly stand (rather than some random subjective sr pref conversion like Tim Rood suggests) and jr preferred would be either surrendered via voluntary tender or converted to common around 50-75pct of par, while the sr pref would be retired in line with the full original 10pct interest + principal payment conclusion.   The warrants can build the wall as Trump's backup plan if Congress doesn't fund it.

Good luck to everyone.  This scandal has been a disappointing yet mostly unnoticed blemish on our country and I truly hope that the current administration sees this as a real priority to quickly fix starting in about 3-5 months.  Thousands of Americans are counting on them to do the right thing.

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10377 on: August 17, 2018, 07:40:49 AM »
I admire the board's residual hope that the courts will deliver for the minority shareholders but I don't see it happening.   Perhaps there's some small chance that the claims court rules it was a taking (a long time from now, including appeals) but the preferred shares were trading below $2 when the NWS was implemented and so the payout would likely be modest. 

Imo, in the end after all appeals / deals / etc..., no investor windfalls will be allowed by the collective government apparatus, especially given the hedge fund narrative.  The market is saying that loud and clear (and this is not an under-researched / inefficient investment among the smart hf community). 

At this point, I believe we're betting on the powers that be coming together offering a fair compromise where all parties get some but not near all of what they believe is fair.  In that hoped-for scenario, the warrants would almost certainly stand (rather than some random subjective sr pref conversion like Tim Rood suggests) and jr preferred would be either surrendered via voluntary tender or converted to common around 50-75pct of par, while the sr pref would be retired in line with the full original 10pct interest + principal payment conclusion.   The warrants can build the wall as Trump's backup plan if Congress doesn't fund it.

Good luck to everyone.  This scandal has been a disappointing yet mostly unnoticed blemish on our country and I truly hope that the current administration sees this as a real priority to quickly fix starting in about 3-5 months.  Thousands of Americans are counting on them to do the right thing.
The public comment period set by FHFA has a November 16th deadline. If the first action to take place -as per Moelis- is for Watt to request the companies to work on a recapitalization program, your hope of a 3 to 5 months resolution falls squarely within this time frame as Watt may not announce anything immediately after the deadline.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10378 on: August 17, 2018, 10:32:52 AM »
Do you know what remedy the All American case is seeking exactly? Is it similar to undoing a previous action while under a unconstitutional regime like the plaintiffs want with the NWS? If so that is indeed positive, assuming the 5th circuit takes up the issue.

while I am sure all American is making statutory claims as well in district court, the procedural posture of case is interlocutory appeal, so the statutory claims have not been heard in district court, so this is not a case like PHH where the relief sought could be granted by means other than the constitutional claim.  so AA has to be seeking the same relief as collins

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10379 on: August 17, 2018, 10:33:52 AM »
Do you know what remedy the All American case is seeking exactly? Is it similar to undoing a previous action while under a unconstitutional regime like the plaintiffs want with the NWS? If so that is indeed positive, assuming the 5th circuit takes up the issue.

Good point. If I understand (relevant part of) the SCOTUS Lucia case correctly, plaintiffs have the right to expect some sort of remedy on top of the courts just fixing the agency's structure to make it consitutional. If All American's desires are taken into account, hopefully Collins's wish for the NWS to be unwound is as well.

this is what Lucia says.  even intimated in prior scotus cases.  we shall see