Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 4370063 times)

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14450 on: December 08, 2019, 10:32:11 AM »
With ACG, it's hard to tell how much they know from inside sources versus how much they're just making educated guesses at.

It's clear that they're putting a lot of resources into the saga, though.

my problem with ACG is that like any other consultant that advises clients for a fee, it must not give away to the public what it charges its clients.  but it can't seem to keep form hitting the twitter button, halfway as it were, with tidbits that it doesn't want to elaborate upon...which leaves non-clients not knowing the whys and wherefores, or whether what they think makes sense

Agreed.  It's tough to know whether they are offering guesses/predictions based on information they have heard vs. concrete facts based on what they have heard.  I am guessing the former.  With that said, David Metzner said this earlier this morning...

https://twitter.com/davidametzner/status/1203720092363550720
The key to the Settlement will be the overpayment being credited back to the #GSEs as a prepaid asset for future commitment fees. Means less capital to raise. #housingfinance

Seniors will be deemed paid back.


ROLG's twitter reply:
https://twitter.com/RuleofLawGuy1/status/1203743635914854401?s=20


Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14451 on: December 08, 2019, 02:50:16 PM »
With ACG, it's hard to tell how much they know from inside sources versus how much they're just making educated guesses at.

It's clear that they're putting a lot of resources into the saga, though.

my problem with ACG is that like any other consultant that advises clients for a fee, it must not give away to the public what it charges its clients.  but it can't seem to keep form hitting the twitter button, halfway as it were, with tidbits that it doesn't want to elaborate upon...which leaves non-clients not knowing the whys and wherefores, or whether what they think makes sense

Agreed.  It's tough to know whether they are offering guesses/predictions based on information they have heard vs. concrete facts based on what they have heard.  I am guessing the former.  With that said, David Metzner said this earlier this morning...

https://twitter.com/davidametzner/status/1203720092363550720
The key to the Settlement will be the overpayment being credited back to the #GSEs as a prepaid asset for future commitment fees. Means less capital to raise. #housingfinance

Seniors will be deemed paid back.


ROLG's twitter reply:
https://twitter.com/RuleofLawGuy1/status/1203743635914854401?s=20

Using the royal third person?  ;)

I think you're underestimating the line of credit amount, though. Right now the undrawn amounts are $110B for Fannie and $140B for Freddie if I remember right. Given the relative sizes of the companies, I would expect Fannie's to go up by $100B if Freddie's stays the same. That would make the total undrawn amount $350B, and 50 bps on that is $1.75B. It would still take 14 years for that to add up to $25B, but that's more reasonable than 50 years. The time value of money doesn't have as great an effect over a 14-year span.

We could also see something crazy like an increase of the credit limit to $500-600B. This sounds outlandish, but it essentially becomes an explicit guarantee while raking in more cash for Treasury each year without materially increasing Treasury's risk; the last $150-250B of that fund would have a vanishingly small chance of ever being needed.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14452 on: December 08, 2019, 03:13:38 PM »
@midas
you make a very interesting point.  treasury has twice raised its maximum commitment by amendment to the PSPA and HERA simply says that all amounts advanced under the PSPA shall be deemed appropriated by congress; congress gave treasury a blank check in HERA.  so I think you are right, the commitment could be raised substantially (and this would make some sense since congress is not going to agree to guarantee mbs). and I agree with your point re my usage of $100B as the continuing line; it will not be reduced below what it is now.

@DR
dividends not permitted by PSPA without treasury approval, and yes treasury approves of its own receipt of dividends

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14453 on: December 08, 2019, 03:30:52 PM »
Sweeney decision... commentary below from Peter Chapman.

Under seal, Judge Sweeney issued an opinion and order (Doc. 447) this evening "granting in part and denying in part" the government's motion to dismiss.  "The court grants defendant's motion to dismiss with respect to the direct claims and denies defendant's motion to dismiss with respect to the derivative claims.  The parties shall propose redactions by 12/16/2019 and file a joint status report in which they propose further proceedings by 1/10/2020," according to notations on the docket sheet.

It appears Judge Sweeney was prophetic when she said "we'll have many days in court," at line 12 of page 255 of the hearing transcript from Nov. 19, 2019. 

I am not sure what this means in terms of the big picture. But Sweeney did not sound like she would be happy rewarding post-nws buyers. Perhaps her ruling reflects this?

Ok then - how big of a deal then was Friday nights news?  Seems to me FHFA and Treasury are playing with a ticking time-bomb

Subsequent e-mail from Peter A. Chapman...
Everything is under seal at this time.  Put your dancing shows on.  This is a huge win for GSE shareholders.  It's a Wow! moment that feels really, really good.  It could also add up to a judgment directing the government to pay shareholders nothing years from now from the U.S. Court of Federal Claims if administrative reform isn't completed.
"You are life, You are life, in You death has lost its sting.  I'm running to Your arms, I'm running to Your arms.  The riches of Your love will always be enough, nothing compares to Your embrace.  Light of the world, forever reign." Listen: https://www.youtube.com/watch?v=ADuWzd7x25c

ValueMaven

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14454 on: December 08, 2019, 03:38:57 PM »
Thank You!

Mephistopheles

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14455 on: December 08, 2019, 03:54:35 PM »
Anybody see a scenario where some classes of junior prefs (those with high dividend rates) are converted at or near par, and some (low dividend rate) are not converted at all and simply left alone/ignored?  Maybe this happens through Admin action and/or a legal settlement, maybe they claim some classes are not convertible, maybe the conversion dates outlined in the prospectus don't align with the plan, etc.  Thanks in advance for your opinions. 


Also curious about this. Technically they're all pari passu but as others mentioned we need 2/3 of each class to agree on a deal to convert to common. What is your thinking behind this and which classes do you own? I tend to own the cheapest ones as a % of par which happens to be a few of the Freddie prefs but maybe I should trade in for some FNMAT.

Wiggins

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14456 on: December 08, 2019, 05:06:07 PM »
Some of the variable rate JPS have such a low dividend rate that it would make sense to just leave them outstanding and pay their dividend. One such example is FMCCL which has its dividend calculated as the 5-yr CMT rate, currently 1.54%. If dividends were reinstated this would trade below par. There are about 10 others across the GSEs that are like this.

One way they could both incentivize conversion into common AND take into account dividend rates would be to offer a conversion based on a fixed percentage of par plus a fixed number of yearly dividends (e.g. 60% par plus 6 years of dividends). Thus, most of the JPS would be valued around par (between 90-110%) with the higher coupon JPSs being rewarded a little more. Just a thought.

emily

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14457 on: December 08, 2019, 05:37:34 PM »
“Defendant should not appeal Sweeneys’s. It would contradict itself. On one hand they want lawsuits to go away and well know that NWS was illegal , conservatorship was wrong as there is no record of insolvency as loudly called out in court. 
And on other hand, if they appeal, means they keep justifying the wrong. All of what is said in the press that GSE reform is a priority would sound like a hoax if they appeal. Release all of docs in discovery, do not redact and also release all 11000 docs, they don’t need to be hidden after 11 years.
https://twitter.com/ACGAnalytics/status/1203430697026936832  "

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14458 on: December 09, 2019, 06:41:25 AM »
Did U.S. steal $300 billion from investors in ‘coercive’ takeover of Fannie Mae, Freddie Mac?
https://www.inquirer.com/columnists/fannie-mae-freddie-mac-mortgage-refunds-20191209.html?outputType=amp&__twitter_impression=true

"You are life, You are life, in You death has lost its sting.  I'm running to Your arms, I'm running to Your arms.  The riches of Your love will always be enough, nothing compares to Your embrace.  Light of the world, forever reign." Listen: https://www.youtube.com/watch?v=ADuWzd7x25c

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14459 on: December 09, 2019, 07:36:53 AM »
Some of the variable rate JPS have such a low dividend rate that it would make sense to just leave them outstanding and pay their dividend. One such example is FMCCL which has its dividend calculated as the 5-yr CMT rate, currently 1.54%. If dividends were reinstated this would trade below par. There are about 10 others across the GSEs that are like this.

I wonder if it's plausible for the gov't to convert some series of jr prefs to common, and simply turn on the dividends for other series of jr prefs?  In other words, treating various series of jr prefs different than others.
"You are life, You are life, in You death has lost its sting.  I'm running to Your arms, I'm running to Your arms.  The riches of Your love will always be enough, nothing compares to Your embrace.  Light of the world, forever reign." Listen: https://www.youtube.com/watch?v=ADuWzd7x25c