Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3997021 times)

allnatural

  • Sr. Member
  • ****
  • Posts: 302
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14920 on: March 24, 2020, 11:39:46 AM »
I imagine anything that removes snr pfds from cap structure would result in extremely bullish action for jr pfds which turn to snr.

Anyone else think the GSEs are going to profit handsomely on providing liquidity today as they are increasing the size of their internal portfolio at record wide spreads which should revert back once (if) this all cools down over next 3-6 months? They could theoretically be buying the lows right now.

If the Senate bill passes, a good public policy move imo would be to immediately inject ~ $50bn into FnF in common equity while exercising the options and retiring the sr pref.  Keep them in conservatorship, no wasted time on conversions, IPOs, capital rules, legal settlements;  let Calabria burn the $75bn in capital on an aggressive 1-year relief plan for small and medium sized mortgages.   It effectively sets a ~ $6 exercise price for the warrants, which seems fair when viewed in conjunction with the 100bn+ net sr pref profits to date.

I wonder how prefs would trade in that scenario given the current market and many other equities depressed in price.


cherzeca

  • Hero Member
  • *****
  • Posts: 2875
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14921 on: March 24, 2020, 12:53:07 PM »
I agree that there likely will not be a direct effect on GSEs from this new stimulus bill though it would be nice to see what comes out of that congress/sausage factory.  some sort of mortgage liquidity backstop (ie Fed) likely to be announced, but that would be mortgage industry wide, not focused on GSEs alone (though Fed has already announced it is buying GSE mbs).  but I think context may have changed with this virus and massive response.  it is easier for GSE-haters to make their antagonistic claims in a normal environment, but I think it would be perceived as tone deaf in current environment

Agree even that douche bag Whalen is crying uncle. Dave Stevens cant be loving the current environment either.  Based on Whalen's article it seems like his attitude changed from let them eat cake to you can save them now as long as you save me too.

Without seeing the text of the bill it is hard to know what happens but as a shareholder I would be very leary of the terms. Remember this is the first "round" of bailouts. Its still early in this and others may come in future in other industries and amounts if this drags on for 3, 6, 9 months. Remember AIG, C got multiple bailouts with increasingly harsher terms.

Granted not apples to apples but it does shine a little bit of a light on shareholder treatment and the completely random terms that each one seems to have.

With a 2 Trillion stimulus bill on the table and the Fed expanding their balance sheet by trillions is now really the time to wipe out the GSEs and put them on the govs balance sheet? It will take some time but eventually if FNF actions stabilize the market, help home buyers with forbearance the turd may come out smell like a Rose just in time for summer/late fall action period.

it is Tim Howard's view that near term the GSEs wont suffer an impact to earnings from increased delinquencies (borrowing at near zero to make guaranty payments) as much as CECL and increase in loss reserves.  one hopes that CECL will be deferred in the stimulus bill...affects banks too
« Last Edit: March 24, 2020, 01:41:30 PM by cherzeca »

orthopa

  • Hero Member
  • *****
  • Posts: 998
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14922 on: March 24, 2020, 01:17:27 PM »
I agree that there likely will not be a direct effect on GSEs from this new stimulus bill though it would be nice to see what comes out of that congress/sausage factory.  some sort of mortgage liquidity backstop (ie Fed) likely to be announced, but that would be mortgage industry wide, not focused on GSEs alone (though Fed has already announced it is buying GSE mbs).  but I think context may have changed with this virus and massive response.  it is easier for GSE-haters to make their antagonistic claims in a normal environment, but I think it would be perceived as tone deaf in current environment

Agree even that douche bag Whalen is crying uncle. Dave Stevens cant be loving the current environment either.  Based on Whalen's article it seems like his attitude changed from let them eat cake to you can save them now as long as you save me too.

Without seeing the text of the bill it is hard to know what happens but as a shareholder I would be very leary of the terms. Remember this is the first "round" of bailouts. Its still early in this and others may come in future in other industries and amounts if this drags on for 3, 6, 9 months. Remember AIG, C got multiple bailouts with increasingly harsher terms.

Granted not apples to apples but it does shine a little bit of a light on shareholder treatment and the completely random terms that each one seems to have.

With a 2 Trillion stimulus bill on the table and the Fed expanding their balance sheet by trillions is now really the time to wipe out the GSEs and put them on the govs balance sheet? It will take some time but eventually if FNF actions stabilize the market, help home buyers with forbearance the turd may come out smell like a Rose just in time for summer/late fall action period.

it is Tim Howard's view that near term the GSEs wont suffer an impact to earnings from increased delinquencies (borrowing at near zero to make guaranty payments) as much as CECL and increase in loss reserves.  one hopes that CECL will be deferrd in the stimulus bill

Agree, and any bailout I was referring to above was for airlines, boeing, etc. I dont think the GSEs are even on the radar for Congress at this time. FnF appear to be doing their job and out of the spot light.

Luke 5:32

  • Hero Member
  • *****
  • Posts: 2796
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14923 on: March 25, 2020, 06:21:34 AM »
Bloomberg Intelligence report out this morning (see attached).  It basically says if the economy (and housing) gets crushed for a sustained period of time, then the Admin plans will be delayed.  If the economy (and housing) has deep problems but rebound fairly quickly, then the Admin plan is still on track for calendar year 2020.  Nothing surprising with that assessment.

Probably worth noting the previous comments on this thread about CRT's and the like and how that will soften much of the blow in a recession.
"I have never seen a tombstone say 'I didn't work enough.' Nobody ever heard a Father say 'I held my kids too much'" Spend A Life by David Dunn, listen here: https://www.youtube.com/watch?v=QRYMn1mg8Ug&list=RDMMyUvxhGRUR3s&index=8

cherzeca

  • Hero Member
  • *****
  • Posts: 2875
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14924 on: March 25, 2020, 07:05:57 AM »
this is a self-induced problem, since the reason why there are delinquencies is the lockdown was imposed indiscriminately on the entire population, as opposed to those only at risk.  but the stimulus bill "should" provide a bridge to the time when everyone gets back to work, assuming there is still work to get back to after this massive mistake.  insofar as you mitigate everyone, you wont do a good enough job to mitigate those who really need it.
« Last Edit: March 25, 2020, 07:19:26 AM by cherzeca »

investorG

  • Hero Member
  • *****
  • Posts: 785
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14925 on: March 25, 2020, 09:03:47 AM »
Mr. Josh Rosner is on a roll.  Thank you.
« Last Edit: March 25, 2020, 09:07:34 AM by investorG »

Covid-19_Survivor

  • Newbie
  • *
  • Posts: 20
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14926 on: March 25, 2020, 09:10:53 AM »
If the Senate bill passes, a good public policy move imo would be to immediately inject ~ $50bn into FnF in common equity while exercising the options and retiring the sr pref.  Keep them in conservatorship, no wasted time on conversions, IPOs, capital rules, legal settlements;  let Calabria burn the $75bn in capital on an aggressive 1-year relief plan for small and medium sized mortgages.   It effectively sets a ~ $6 exercise price for the warrants, which seems fair when viewed in conjunction with the 100bn+ net sr pref profits to date.

I wonder how prefs would trade in that scenario given the current market and many other equities depressed in price.

Have your answer yet?

Depressing how poorly these things are doing today. No deferment of mortgages in stimulus bill; these things should be screaming higher. Money's pouring into MREIT's (and everything else) first though, I guess.

Luke 5:32

  • Hero Member
  • *****
  • Posts: 2796
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14927 on: March 25, 2020, 09:23:13 AM »
Mr. Josh Rosner is on a roll.  Thank you.

https://twitter.com/JoshRosner/status/1242836364380471296
If the #government expects any #corporations to trust them today they must show goodwill by recognizing #GSEs repayments & writing down the #GSE debt immediately. @USTreasury @FHFA  @realDonaldTrump  @larry_kudlow  @WhiteHouse
"I have never seen a tombstone say 'I didn't work enough.' Nobody ever heard a Father say 'I held my kids too much'" Spend A Life by David Dunn, listen here: https://www.youtube.com/watch?v=QRYMn1mg8Ug&list=RDMMyUvxhGRUR3s&index=8

Luke 5:32

  • Hero Member
  • *****
  • Posts: 2796
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14928 on: March 25, 2020, 09:24:13 AM »
Have your answer yet?

Depressing how poorly these things are doing today. No deferment of mortgages in stimulus bill; these things should be screaming higher. Money's pouring into MREIT's (and everything else) first though, I guess.

I wouldn't sweat the daily price action.
"I have never seen a tombstone say 'I didn't work enough.' Nobody ever heard a Father say 'I held my kids too much'" Spend A Life by David Dunn, listen here: https://www.youtube.com/watch?v=QRYMn1mg8Ug&list=RDMMyUvxhGRUR3s&index=8

Covid-19_Survivor

  • Newbie
  • *
  • Posts: 20
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14929 on: March 25, 2020, 09:39:53 AM »
Agreed, and I'm not really. It's been a painful ride down but thesis remains unchanged.