Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 2804902 times)

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11030 on: December 13, 2018, 05:39:28 AM »
Also continued props to cherzeca

+1. Christian is a stud. Incredibly grateful he accepted my pleading for him to join this community!  He was instrumental in my understanding of the MBIA/BAC legal mess a few years back through his blog, and I knew he would be very helpful to many people here.


Wiggins

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11031 on: December 13, 2018, 05:51:08 AM »
I'm thoroughly enjoying cherzeca's and everyone's comments.
"pre-conservatorship" shareholders as used by Calabria may be intended to mean any shares other than Treasury's senior preferred stock, which are clearly post-conservatorship shares. And since he's talking about the NWS, this makes sense...the NWS benefited only that one class of shares (Treasury's). Fortunately, Lamberth clearly stated that shareholders' rights transfer when sold. It's inconceivable to me that Calabria could come down on the other side on this issue.

SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11032 on: December 13, 2018, 05:59:00 AM »
I'm thoroughly enjoying cherzeca's and everyone's comments.
"pre-conservatorship" shareholders as used by Calabria may be intended to mean any shares other than Treasury's senior preferred stock, which are clearly post-conservatorship shares. And since he's talking about the NWS, this makes sense...the NWS benefited only that one class of shares (Treasury's). Fortunately, Lamberth clearly stated that shareholders' rights transfer when sold. It's inconceivable to me that Calabria could come down on the other side on this issue.

Agree.  I'm trying to identify any potential holes in the thesis and I think it speaks to where we are at when this is all there is... aside from existential risks in terms of trump impeachment->administration wipeout

DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11033 on: December 13, 2018, 06:22:12 AM »
Also continued props to cherzeca

+1. Christian is a stud. Incredibly grateful he accepted my pleading for him to join this community!  He was instrumental in my understanding of the MBIA/BAC legal mess a few years back through his blog, and I knew he would be very helpful to many people here.

+1 for cherzeca. Absolutely needed on this board.
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rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11034 on: December 13, 2018, 06:53:23 AM »
Following Chris from the google board days :)

In my view, the Calabria/Krimminger 2015 paper may now be a bit overrated. It's been over 3 years, a new administration has taken over and soon a new Congress will be in place. Not to mention the real estate market has accumulated great imbalances.

Calabria may now see receivership only as a tool to achieve something else and not as the intended interpretation on that paper: liquidation (as a should-have). Whether Calabria decides the course of action is to privatize the companies, good bank/bad bank, or something else, receivership could be the transition method. If it happens this way, he will want Congress to ok any receivership scenario by making senators feel at ease with it and making it part of a legislative piece. Which may mean lots of hearings and time. Meanwhile, he may push for a 4th, kill the Srs. and recap. Time could favor the Jrs. as they may continue to add value should the Srs. go away.

Either way, I think he will not be looking to kill equity and that will be fair to shareholders. I think of Trump/Mnuchin as being on that camp too.

Jcmeg35

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11035 on: December 13, 2018, 07:09:34 AM »
I would also like to say thank you to @Chereza as well as everyone else for your comments/thoughts over the years - as I have not made any contribution to date (mea culpa!).

While my view is that recap is the most likely scenario in 2019 and beyond, I have also been trying to figure out other outcomes. To @rros and others, I am not sure I fully follow the basis for receivership and the "good bank/bad bank" idea. What "bad assets" would be separated in this scenario and what "good assets" would remain. Under that view what would be liquidated and what would be the rational for this? 

Further to that point, as I think others have mentioned, given how messy that process is, one would have to imagine it would create disruption to the ongoing operations that currently write new business, potentially creating big issues in the US housing market.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11036 on: December 13, 2018, 07:16:07 AM »
well, thanks for the support guys!  you do realize don't you that I have been consistently wrong regarding predicting court outcomes.  but maybe collins 5th circuit en banc may improve the score.  here is the P supplemental brief filed yesterday:  https://www.dropbox.com/s/jheuxxz7v16bd4m/collins%205th%20cir%20en%20banc%20brief.pdf?dl=0

when a lot of Calabria's Cato writing was done, the GSEs were very different from now...some $trillion of whole loans inventory, non_QMs, fighting a competitive battle with PLS that were gaining market share.  none of that is relevant anymore...indeed, imo, most of the important GSE reforms everyone talks about as being so necessary have already been implemented by FHFA.  now when you hear a congressperson talk about GSE reform, it is hard to understand what they mean with any specificity except political speak for improving tbtf presence in mortgage finance.  so understanding that the great poobahs of policy in congress are extremely unlikely to agree on a bill, it is up to the administration to engineer a return to soundness so that the taxpayer is not on the line via the treasury line of credit.  this is Calabria's task...not to implement some half-baked policy like the fellow travelers in 2012 by trying to achieve what congress couldn't agree on, but simply return to a safe and highly functioning mortgage finance market...and I think he gets it.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11037 on: December 13, 2018, 07:25:23 AM »
I would also like to say thank you to @Chereza as well as everyone else for your comments/thoughts over the years - as I have not made any contribution to date (mea culpa!).

While my view is that recap is the most likely scenario in 2019 and beyond, I have also been trying to figure out other outcomes. To @rros and others, I am not sure I fully follow the basis for receivership and the "good bank/bad bank" idea. What "bad assets" would be separated in this scenario and what "good assets" would remain. Under that view what would be liquidated and what would be the rational for this? 

Further to that point, as I think others have mentioned, given how messy that process is, one would have to imagine it would create disruption to the ongoing operations that currently write new business, potentially creating big issues in the US housing market.

as to your point re "messiness", Mnuchin is a banker, and so is Otting if he gets the FHFA directorship as acting director until Calabria is confirmed.  these guys didn't get paid unless a deal closed, or while running OneWest, unless the profits were booked.  there is plenty of GSE fatigue in congress (among those still there, understanding that the two biggest blowhards on issue are out the door), and I just don't think there is appetite in the administration for the implementation of anything dramatic that doesn't have a reasonably high likelihood of success...which is the thesis point of the moelis blueprint.  I would be surprised if Calabria wants to go rogue once installed.

DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11038 on: December 13, 2018, 07:58:33 AM »
well, thanks for the support guys!  you do realize don't you that I have been consistently wrong regarding predicting court outcomes.  but maybe collins 5th circuit en banc may improve the score.  here is the P supplemental brief filed yesterday:  https://www.dropbox.com/s/jheuxxz7v16bd4m/collins%205th%20cir%20en%20banc%20brief.pdf?dl=0

when a lot of Calabria's Cato writing was done, the GSEs were very different from now...some $trillion of whole loans inventory, non_QMs, fighting a competitive battle with PLS that were gaining market share.  none of that is relevant anymore...indeed, imo, most of the important GSE reforms everyone talks about as being so necessary have already been implemented by FHFA.  now when you hear a congressperson talk about GSE reform, it is hard to understand what they mean with any specificity except political speak for improving tbtf presence in mortgage finance.  so understanding that the great poobahs of policy in congress are extremely unlikely to agree on a bill, it is up to the administration to engineer a return to soundness so that the taxpayer is not on the line via the treasury line of credit.  this is Calabria's task...not to implement some half-baked policy like the fellow travelers in 2012 by trying to achieve what congress couldn't agree on, but simply return to a safe and highly functioning mortgage finance market...and I think he gets it.

Any legal opinion form someone qualified is better than my ramblings. In any case, we're still right, its just that the deck is stacked against us. I think our investment thesis will be vindicated, but we won't get the legal ruling we should. I just hope we don't set precedent with it.
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DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11039 on: December 13, 2018, 08:07:11 AM »
https://www.barrons.com/articles/podcast-a-13-billion-miss-on-big-tobacco-stocks-51544695274

"In fact, a recent study from CoreLogic found that jumbo mortgages now have lower interest rates than conventional mortgages even after adjusting for the superior characteristics—higher credit scores, higher incomes, and lower loan-to-value ratios—of jumbo borrowers. The reason seems to be an increase in guarantee fees charged by Fannie and Freddie, which offloads risk from taxpayers to borrowers."

G-fees too high? Is this going to be a tool to reduce market share after all? or ae they 'artificially' high as there's no capital in the companies?
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