Thursday, January 23, 2014

Fannie would get about $537M in deal with Lehman

Fannie would get about $537M in deal with Lehman


fannie should of got 2.5 billion from them. FHFA, doing a bang up job getting back Fannies money for 10 to 25 cent on the dollar. BS.

Paul's concerns and my answers

paulthetree  6 hours ago
here are a few concerns.
1) As far as I can figure out, only retail investor and hedge funds have invested. Why? (I have seen numbers as low as $6 and as high as $360.)
2) Why no mutual funds? I understand many, but not all can not invest in a stock under $5. I realize mutual funds are more limited in scope than hedge funds, but it does not rule ALL out.
3) If it is such a sure thing (investment at least doubles), why haven't people like Warren Buffett or Carl Icahn jumped on board?
4) Why haven't we heard of any major institution making major buys?
5) This is my major concern. If all we read from those who believe it is drastically undervalued is true, why is the price still at three dollars and change? Why haven't the big boys came in a scooped up these share which are worth double to 120X present PPS?
6) Why are most of the high rollers going with preferred shares and not common?
7) Why are most if not all the lawsuits filed in behalf of preferred shares and not common?
8) Is there any special voting power the Government's preferred shares have?
9) What would this new government entity (unfortunately I don't recall what it was called) which was formed earlier this year to replace FHFA do to common shareholders?
10) I have heard the expiration date for the government to exercise warrants have past, then I hear they aren't. Which is it? If it has not passed and the government decides to exercise them, 79% of common shares will lower the value greatly of any potential windfall.

That is a start to a list of concerns. I believe ten should get my point across. My personal advice to any investor, is don't bet the farm on a speculative stock. Especially if they don't have a satisfactory responses to these type of questions. This is a high risk / high reward stock. I, sincerely, hope all who are invested or are thinking of investing realize this.

=========================
My Answers:

1) Retail, thats us, and anyone that held this long term since before conservatorship. Hedge funds buy what they think will make money. As far as Institutions they have rules on their buying that most likely do not allow OTC buying. 
2)Mutual Funds do own shares, look at Major holders list, Fairholm is a mutual fund too.
Top Institutional Holders
HolderShares% OutValue*Reported
Edge Wealth Management100,4500.01302,354Dec 31, 2013
Geduld, Emanuel, E.100,0000.01131,000Sep 30, 2013
Rhumbline Advisors63,5000.0183,185Sep 30, 2013
PanAgora Asset Management, Inc.7,2000.009,432Sep 30, 2013
Tradition Capital Management LLC10,0000.0013,100Sep 30, 2013
Livingston Group Asset Mgt Co., Operating as Southport Capit10,0000.0030,100Dec 31, 2013
SOL Capital Management CO10,5000.0013,755Sep 30, 2013
Ray (Gerald L) & Associates17,7000.0023,187Sep 30, 2013
RBF Capital, LLC50,0000.0065,500Sep 30, 2013
AlphaMark Advisors, LLC5,9130.007,746Sep 30, 2013

Top Mutual Fund Holders
HolderShares% OutValue*Reported
Capital Income Builder, Inc.12,458,2061.0837,499,200Dec 31, 2013
Lord Abbett Bond-Debenture Fund818,0000.071,071,580Sep 30, 2013
MET Investors Ser Tr-Lord Abbett Bond Debenture Portfolio227,2750.02297,730Sep 30, 2013
Lord Abbett Series Fund-Bond Debenture Portfolio36,0000.0047,160Sep 30, 2013
John Hancock Var Ins Tr-Total Stock Market Index Tr27,6930.0036,277Sep 30, 2013
Principled Equity Market Fund5,5000.007,205Sep 30, 2013
  
3)Fairholm and Ackman are not small potatoes. Buffet does not own all stocks. Nor does Icahn. No on says its a sure thing, just like any other stock.
4)we have and this is addressed in no 2
5)This is not a sure thing, there is risk. Political risk. You have to decide what you think will happen. The downside is you lose all your money invested, the upside you make 30x your investment. If it were a sure thing it would be that price now. The court will decide. You have to decide before that day.
6)If company is liquidated the preferred shares get paid first, after the govt shares get paid. then common. you have to decide if F&F will be liquidated. THEY are the most profitable companies in 2013. Liquidate? I think not.
7) The lawsuits benefit both preferred and common.
8)The govt shares have NO voting powers, NONE.
9)FMIC would replace FHFA. It would be same as FHFA is now. accept it would insure 5 trillion dollars of F&F for a fee.
10)Hera only allowed purchases till 2009 by the treasury. The agreement with F&F went on for 20 years or more. even if diluted and F&F removed from conservatorship, the commons would be worth $60 a share. And the govt would face a takings of 80% of my property. Dilution. constitution of the USA, govt must pay for property it takes.

Fannie Mae website

From today's Fannie Mae website. Note they have almost 4 trillion on their books,

http://www.fanniemae.com/progress/index.html

Also note how much good they do for AMERICA. I cant see the govt wanting to kill all this GOOD.

F&F Reopen the taps

Fannie Mae and Freddie Mac

Reopening the taps

Risk sharing is happening at F&F NOW


This is from motley fool article today. 

http://www.fool.com/investing/general/2014/01/23/2-big-moves-show-the-future-direction-of-fannie-ma.aspx

the FHFA also announced that Fannie Mae is close to the completion of its second Connecticut Avenue Securities, or C-deals, transaction, which effectively allows institutional investors to invest in the credit risk of mortgages that Fannie Mae retains on its books. This move essentially helps manage and transfer the risk posed to Fannie Mae by bringing in private investment.

Watt said, "This and other risk-sharing transactions undertaken by Fannie Mae and Freddie Mac provide valuable insight as to how to restore private sector participation in housing finance and reduce losses for taxpayers."

--------------------------------

They (MF) spin this as being a bad thing for shareholders , I don't see it that way at all.

StocksDD, very good F&F source

Give him a look and see what he says about GSE's

Gse talk starts last JAN 9th

http://stocksdd.blogspot.com/

Wednesday, January 22, 2014

How the Obama Administration Stole Fannie and Freddie

this is a MUST READ:

How the Obama Administration Stole Fannie and Freddie

http://www.nationalreview.com/corner/369201/how-obama-administration-stole-fannie-and-freddie-ike-brannon?utm_source=twitterfeed&utm_medium=twitter

====================
my comment to this article

I would like to point out the govt settled the FRAUD from the banks on the victims Fannie and Freddie, for 10 cents on the dollar. Had the banks paid for their crimes fully, Fannie and Freddie would of never needed a dime from the treasury. Lets not forget all the free money the govt gave to THE BANKS in 2008-2009 from the then called CREDIT DEFAULT SWAPS. This is where the feds gave money to the banks for their CRAP loans on their books, in exchange the banks did not go bankrupt. I want to see the banks pay back the other 90 cents on the dollar to fannie and freddie. equal to 180 billion dollars the FHFA left on the table and let the banks off the hook for. FRAUD is still a crime is it not? THE BANKS put the screws to all of us, NOT F&F. F&F were here to save the housing in 2008-2014 when all private money ran away after losing 4 times what F&F did. Keep in mind the 20% fannie and freddie did lose to risky investments were due to the LIES on the mortgages that the BANKS SOLD to F&F. remember the one doing the BAD always pays the Innocent. F&F have not lost any lawsuit yet and the BANKS are paying huge sums, even if only 10% of what they should, TO FANNIE AND FREDDIE. THE Banks really stuck it to the american taxpayer.

Treasury has talk, And I have talk.

from FT.com

http://www.ft.com/intl/cms/s/0/7a056cc0-839a-11e3-86c9-00144feab7de.html#axzz2rAl8jEGU

Mr Stegman

“Some stakeholders mistakenly argue that housing finance reform is no longer needed, that the GSE’s are so flush with cash . . . We could not disagree more.”


Mr Stegman said that recent results from Fannie and Freddie may “overstate the true financial conditions of the enterprises”. The two mortgage financiers have surged to profitability, allowing them to return billions of dollars to the US government which bailed them out and stalling efforts in Washington to wind them down.
However, Mr Stegman said that about $75bn of their combined income came from one-time tax reversals, while more than $20bn of income came from the release of provisions for bad loans and legal settlements related to mortgages.
More than half of the combined income from GSEs was generated through their vast investment portfolios, which the government wants them to cut from their current $1tn levels, he said. 
“At the time they went into conservatorship, the GSEs used their portfolios like hedge funds,” he added.
“Continuing the GSEs in a conservatorship is not the best framework for broadening the mortgage market over time,” he added.
Mr Stegman also said Treasury wanted to see new entrants in the housing market during the transition process of winding down the GSEs in order to prevent any disruption in the flow of housing credit.

====================================

Now what I have to say to this:
75 billion on reversal is a LOSS they never should of took. TY FHFA for the huge loss in 2008 takeover of UNREALIZED LOSS. this was not needed, It was too much. Fannie and Freddie needed only 110 billion instead of 188 billion. NOW the 110 is with interest on 188 billion. see the problem with that? so lets say they needed 90 billion. And trust me that number is WAY more than they actually needed from treasury with out the 10% interest on the money. 
And the 20 billion was for the FRAUD committed by Banks on F&F. THIS REAL NUMBER WAS 200 BILLION. look to articles on how much bank fraud on Fannie and Freddie there was, and how much the dept of justice sued for. Ill tell you it was 200 Billion in Fraud from the BANKS of the USA and world sued by the FHFA as conservator for fannie and freddie. The FHFA was settling for 10 cents on the dollar with the banks. the other 180 billion was still FRAUD but FHFA let the banks off the hook. So if not for the Fraud by the banks, F&F would be north 100 billion and would never have needed a dime from the treasury. IF the FHFA would of got the true value of the fraud, F&F would never be in conservatorship. as far as the other 60 billion that F&F paid, that came off the backs of these two pillars of the USA mortgage markets hard work. And that money belongs to the SHAREHOLDERS of the two companies. The money the treasury wants is the 180 billion the FHFA let the banks off the hook for their FRAUD. 

If you mean that F&F invested their own money from their business in the markets, then yes, Like hedge funds. Hedge funds are no different than a mutual fund. They invest and try to turn a profit. This is normal for all companies. The FHFA speaks for F&F as far as HERA goes and the Treasury has no say in the GSE's.
The only thing being wound down is the GSE legacy book. NOT THE NEW BOOK which is 75% of these two business now. I still can read a 10-Q and I dont need to be FED misinformation from the US treasury about the fate or action of F&F. I fully understand that F&F were defrauded by the banks. FRAUD is still a crime? YES.
The bankers need to be held accountable. This is why the banks are all running from mortgages, they dont want this sham preformed on them next time they get caught with their hand in the cookie jar. Do you think the Banks want to be put in conservatorship and have their shareholders treated like they dont exist? NO they dont.


WellsFargo and Citibank are getting out of mortgages.

Banks are running from mortgages, BECAUSE they do not want to be taken over like fannie and freddie were in 2008. THEY can make money elsewhere. THEY DON'T want to be the next Fannie In 10 years. The politicians need to get the message they have sent to the markets. They have told the banks they will take their company if they want. They have told them they will cut all shareholder rights and take all profits from them, forever. 
THAT IS THE MESSAGE that they have sent. They need to wake up and smell the money they are TAKING from the shareholders of a 100% private company, as ruled by the federal courts. 

US treasury is commenting for FHFA? ODD!!!

Today this was posted by Reuters
U.S. Treasury Department's housing adviser Michael Stegman Said :
Until Congress finds a solution to overhaul the mortgage market, Treasury will aim to transition towards a system in which Fannie Mae and Freddie Mac issue a single security.
"This would reduce the cost to taxpayers and improve liquidity," he said.

We believe that keeping [Fannie and Freddie] in a conservatorship whose
contours and restrictions were defined by emergency legislation is not the best
framework for broadening the availability of mortgage credit over the longer
term. The [companies] in conservatorship have done an exceptional job of
maintaining a deep and liquid secondary market in and following the recent
crisis. However, we believe that continued uncertainty about their political
future will continue to be a headwind impeding access to credit especially for
average families with less than pristine credit. For all these reasons,
comprehensive housing finance reform remains a top administration priority. 

RESTARTING PRIVATE MORTGAGE SECURITIZATION: Mr. Stegman has suggested in the
past that the lower cost of government-backed lending isn't the only reason
privately-issued securitizations have been slow to restart. Other technical
barriers remain unaddressed: 
In the absence of an apparent leader, Treasury plans to coordinate a series
of conversations with relevant regulators, market participants, and other
stakeholders to help accelerate necessary reforms in the non-agency space. 
===================
Now what needs to be understood is the the Treasury is not in charge of Fannie or Freddie! HERA gives the FHFA that power and only THE FHFA. What else needs to be said is that the security he is talking about is not the Stocks or the corporations. He is talking about the Mortgage Backed Securities (MBS) that the two bundle up into a BOND, and sell it to the BOND market. So I hope this clarifies the statements made by the above speaker.

Value of a share of FNMA

Value of  shares of FNMA:

This is my valuation for the stock if certain things happen. Not what the stock price today is, $3.17.

If a bipartisan Bill starts to move through congress, $6.00, why because the bill will have to leave Fannie intact. And in doing so, this would move the stock upward from this point forward.

If the court overturns the Sweep and removes the Senior shares value against them, $60 as there would be all the money these companies are worth left for only shareholders. not govt, even if in conservatorship still.
the govt would still hold the warrants for 79% of company.

If the court overturns the Sweep and removes the Senior shares value and removes the warrants. $300 a share. the govt would still hold conservatorship, but the company would be intact and ALL value would go to the Shareholders.

The Value of Fannie is Easily 100 billion dollars. IF SOLD. Remember Fairholm offered 50+ billion for them and it was flat out rejected. And for the most profitable company in the USA, FANNIE MAE, 100 billion would be cheap considering they brought in over 35 billion in profit in 2013. And their Old book is shrinking and their NEW book is growing and "it is strong" quoting the 10-q 75% of their business NOW.

Removal of Conservatorship would fetch $360 a share today. If warrants were canceled. The market cap of Fannie could be around 420 BILLION based on PE of 12 and 35 billion in earnings per year.

Now all these are Just wild guesses but you can see how they are derived.
there is LOTS of room between $3.17 and $360 , This is the upside to FANNIE MAE.
=========================================

What is the downside?
The downside would be whatever the govt tries NOT to PAY THE RIGHTFUL OWNERS OF AN AMERICAN CORP, as found by courts over the past five years that Fannie is shareholder owned and NOT govt owned. I cant see an argument for not paying out to current holders what ever the price was the day before the conservatorship. This amount is $7. I cant see a value less than this.
$7 is %125 higher than todays price. I see no real downside for holding long.

Tuesday, January 21, 2014

The Path of least Resistance

Remember the whitehouse projected 20 years for fannie and freddie to payback, this was reported early 2013. it took 9 months after the report. DC was off 19 years on their estimate.!! how is that possible?
It wasn't . And the current movement on these two GIANTS is because of the early payback. The govt is fully aware they will lose the court case and want to rectify all of it NOW. But they cant figure out how to do it without wrecking the economy. This leaves only one choice, take the easiest path. That path is to use the system that is working and tweak it. Give it back to the shareholders and charge a fee for the backstop. Everyone wins. Dont forget to do risk sharing from now on, for ALL the BONDS. And there ya go. The path of least resistance. This risk sharing is already happening NOW with fannie and freddie, and was working the entire time with multi-family. even in 2008-2013. Multi always made money and held its own. the only thing that went belly up was the BANKS FRAUDULENT loans they sent to F&F. This is the path of least resistance. FHFA regulate the two GIANTS to hold less new mortgages and have fannie and freddie open up the Common Security platform for the banks to sell there more risky crap that is non conforming, Like Bear Sterns did, and allow the Bond holders to share the risk with the banks on that garbage they write loans on. Im ranting now. sorry. The topic still holds true.

dr_curious1  7 hours ago
Yes, I remember very clearly--like it happened yesterday! Our government has effectively backed itself up into a very uncomfortable corner. Delay tactics will only work for so long. In fact, that "window of opportunity" that is so carelessly thrown around is almost shut. We (shareholders) have a major "win" coming just around the corner which is not emphasized enough. That "win" will be this forthcoming quarterly earnings in which we escalate beyond "net-zero" with no reform bill in sight. Once this is announced the dynamics will change drastically. There will be no more "almost paid back" and this is psychologically relevant. The media will sway public opinion in our favor as taxpayers are made whole and as we continue to be exonerated via winning countless BANK FRAUD lawsuits.
1st major win= Net-Zero
2nd major win= Court Ruling against net sweep of profits (IMO- window closes for any major reform)
3rd major win= NYSE re-listing or Release from Conservatorship

Warrants should be cancelled and stock should not be diluted unless there is an agreement of some sort which presents itself before the courts make a ruling. (I personally believe all warrants should be cancelled) Longs be patient,...sit back,…accumulate, and enjoy the ride! Be thankful that we were able to scoop up shares at such a ridiculous discount to value :) 2014 will be the year to remember! 

my response to WARNER

Warner: We’re overdue for housing finance reform…

Warner writes an article of the name above. the comments are very good to him.
by Mark R. Warner 

My response to his post:

The housing crisis, as proven by FHFA settlements with banks, was caused by BANK FRAUD upon Fannie and Freddie. Anyone looking for the truth knows the guilty party pays. And the Banks are the ones paying to FANNIE and Freddie. The Banks Defrauded these two pillars of the american mortgage system since FDR to the tune of over 400 Billion dollars. The FHFA has allowed the BANKS to pay 10 cents on the dollar for their FRAUD. the true crime is the 360 billion that is still owed to FANNIE and FREDDIE by the banks and owed to the TAXPAYERS. FANNIE AND FREDDIE are and were the VICTIMS. 
THESE are the FACTS and there is the TRUTH.

Fannie Mae, Freddie Mac profits give little reason to shut them down

Fannie Mae, Freddie Mac profits give little reason to shut them down


news from: The Economic Times


=============
Fannie and Freddie back 60% of all mortgages. The new legislation that keeps the two running by the three dems in the house, would set them free and allow them to back 30% of the mortgages. after 5 years of tapering them from 60 to 30%. but none the less they would be half the size they are now. or back to 2008 levels. before the crisis fannie traded $60 a share. and no new shares have been added since then.

Franks Letter to Mel Watt.

foscofrank2  1 minute 31 seconds ago Flag

COMMON SHARE HOLDER LETTER - FINAL - 

Director Mel Watt’s Office
Federal Housing Finance Agency
400 7th Street NW
Washington, D.C. 20024

January 13, 2014

Dear Director Watt,
Congratulations on your Senate confirmation and recent swearing in as the director of the Federal Housing Finance Agency (FHFA). Your confirmation comes at a critical time for both our economy and the future of the housing reform. Although I understand that the White House, Congress and the Senate are looking at the future of the government-sponsored enterprises (GSE) your leadership, background and legal expertise will help clarify the confusions we common share holders have regarding the current conservatorship and its direction prior to your confirmation.

As you know, the economic crisis was directly related to the mortgage crisis and caused congress to enact The Housing and Economic Recover Act (HERA) on Jul 30, 2008. H.R. 3221, (110th). It is to provide needed housing reform and for related purposes and temporary authorities. This bill includes THE specific language that defined procedures for managing the (GSE's) conservatorship.
It is also of public record that through the economic crisis no GSE was ever found to be insolvent at that time of conservatorship and or during anytime during the last 5 years. 

Because of the substantial support provided by the GSE's to the housing industry and it's unique link to the treasury they were forced into conservatorship and used as tools enabling the government to stabilize and support the housing market collapse. Support related liquidity of the MBS market and helped fuel the economy through massive monthly bond purchases. This is now a matter of public record showing bank fraud to be the primary cause.

We tax payers also understand through public record that the FHFA settlements owed to Fannie Mae and Freddie Mac were originated from fraudulent bank loans sold to (GSE's) which were unknowingly purchased and converted into MBS bonds. Theses were from, fraudulently submitted loan papers and combined with relaxed regulations allowing subprime loan regulations passed by congress to be a required purchase. All these securities requiring the (GSE's) to purchase toxic securities of unknown risk. If congress appointed a third party conservator those purchases would have not been allowed by virtue of HERA's temporary authority to operate the (GSE's) back to a safe solvent position.

We tax payers understand extreme measures were taken and from those we are grateful our country is healing from that era. If the goal was to heal and NOT steal but restore, make better and safer, then the entities and charters is HERA conserved. The securities are own by everyday tax paying people who have been harmed from the past but who are now invested in our future of the (GSE's). Both groups of tax payers are one in the same and we the people own the (GSE's) and have and continue to be harmed by legislation that threat tax PAYER owned common stock securities in the (GSE's).
These combined issues are now clearly linked to over project losses creating a false perception of insolvency that still persists TODAY.

Of public record the (GSE's) were used to absorb toxic loans from some banks as well the (FHFA) demanded repurchasing of toxic loans creating artificial representations of the (GSE's) financial conditions during this time. These actions by FHFA were all to be effort to decreased toxic loan exposure, receive settlements from fraudulent loans stabilizing the housing financial industry. This followed the authority of HERA HOWEVER these transaction were to be transacted in a manner to increasing financial condition and restore solvency. The net effect was overstated treasury draws verses actual draws needed.

Also of public record, was the massive down-turn of home values across many markets, creating massive (mark to mark) accounting losses. The devaluation of the housing sector combined with massive job losses created historically high foreclosures many from unsustainable sub-prime loans.

These scenarios created massive asset losses (more paper losses than actual operating losses), which in turn caused overly inflated and unwarranted draws from the treasury to the (GSE's). This was to keep (mark to mark) asset write downs categorized as assets in a positive net-worth for GAAP.


Also of public record the HAMP foreclosure prevention programs combined with foreclosure sales and refinancing operations of the (GSE's) proved to have been needed tools we must keep. These operation proved successful in dramatically reducing actual losses. However extreme circumstances required extreme measures & FHFA had the authority to take draws from the treasury, (and did so) that were unwarranted to the operational needs of the (GSE's) and were taken in the event of a catastrophic losses which could not be foreseen.

As tax payers first and a shareholders second, we tax payers relied on the FHFA and Treasury authorities to operate under HERA. This is clear to account for an orderly pay back closing out treasury obligations through the use of prioritized dividends per HERA.
Mr. Director, at the point conservatorship was initiated the common shares of each (GSE) were publicly offered as instruments of ownership, i.e. Fannie Mae and Freddie Mac common shares with suspended rights while under support of the conservator. I, as a taxpayer, was able to purchase via NYSE & OTC in the open market. As a taxpayer I read the known risks via HERA and the conservatorship documents.

The purpose of these documents was to clearly fix, restore as well strengthen the GSE's with a capital plan to pay the government back first from restricted dividend payments prioritized to the treasury and in combination, implement a capital plan for restoration and capital market access. As this is clearly stated and I am not a constitutional lawyer verses a US tax PAYOR.


As you know Mr. Director, over the years Fannie Mae and Freddie Mac common stock has and continues to trade under the rules of conservatorship. These securities were, at that time, said to be worthless. But we tax payers believed that no better partner can a corporation have than the United State Government.

Because at that time the greatest risk was that the companies could have been placed into receivership the securities traded at a huge discount.

Mr. Director this did and still allows many lower class and middle class taxpayers to acquire shares otherwise financially out of their reach with the hope and risk the US government work make into a sound and solvent condition, per terms of the aforementioned agreements.

Mr. Director, as you know, clauses for receivership were never met nor was the required public announcement provided to the Tax PAYOR buying these common stock shares in the open markets would have any chance of being taken hurting US tax payers.

HERA states clearly that the conservator can convert from being a conservator into a receivership and or liquidation but notices and defaults triggers were clearly defined for all us tax PAYORS to read who purchase the common stock shares. These requirements of notice or defaults to trigger receivership or liquidation has nor were never met per the HERA requirements


The housing market has stabilized and begun to recover, and Fannie Mae and Freddie Mac have rebounded and returned to profitability. The agreement to suspend shareholder rights in exchange for extraordinary use of the GSE was to process:
to process fraudulent loan buy-backs;
to create MBS fraud settlements;
to stem foreclosures and process management; and
to absorb over estimated (mark to mark) accounting losses. These creating large paper losses, and creating draws from treasury but were on non-operating losses. These paper losses are the DTA’s being used to send the money back paper losses only due to the then GAAP accounting rules.

Since the end of 2011, neither Fannie Mae nor Freddie Mac has had one single quarter in the red. Both GSE’s have virtually returned all the bailout funds in 3rd quarter 2013, and will have fully repaid the treasury based on HERA’s temporary authority.

My Concerns:
I would like to have response and clarification regarding the repurchase obligations as priority to taxpayer payback via the treasury limited authority to purchase or obligate securities under section (1117) of HERA, if, implemented per those terms?

Was the third amendment of 2012, “Income Sweep” implemented or used as a means to reduce the obligations to the US Treasury? I am confused because public officials are saying there is no payback mechanism, which is clearly stated in HERA as priority for any dividends paid out?
Note: HERA states priority to protect taxpayers (HERA subsections below) states the authority on priority on funds is to be used to payback the treasury first for any securities or obligations be purchased or close out first for financial support


Mr. Director this clause is clear that the GSE’s could have been subjected to discretionary takings of treasury support that were not needed, but only by discretion, were infused, overestimating the actual bail out loan needed to operate under HERA.
Note:
HERS also states the director can increase or rescind any capital requirements of the (GSE's) including the powers to release upon determination of safe and solvent. This gray area allowed over estimated draws to be confused with real solvency as well the (GSE's) can be released without any fixed capital requirements for solvency.

Is there or will there be a capital plan developed in 2014 for a return to the private markets and ending conservatorship?

Do you agree that the warrant agreements attached to the GSE’s conservatorship (although still within the 20 year period) cannot be executed because HERA’s temporary authority to purchase securities defined as equities (HERA see section 1117) specifically states authority to purchase securities other than for bailout purposes ended December 31, 2009?
What is your position on priorities to ongoing quarterly income sweep draws ONCE repayment to the treasury has been completed?

I am just one of thousands of US taxpayers who invested in the Fix and Restore agreement the US Treasury and Congress made with both GSE’s. We are tax paying citizens that span across our great land representing many 1000's of taxpayers from various backgrounds ranging from minority to middle class Americans. We know proudly own original entity/chartered bailed out common stock. Over 21% of the common stock is now owned by mutual and or hedge funds and still owned by many retirement and elderly funds. We tax PAYERS invested in the trust of the US government to fix these two organizations. We tax PAYERS trusted that being told the Priority of any funds paid out of profits was to us (the taxpayers/treasury obligations) and then the organizations would be fixed to a safe and sound condition and put back into the public markets originally taken from AND back to the original securities regardless of time of purchase. All of us tax PAYORS (common folks) common share holders believed in this partnership,


Mr. Director is it your position in the event of a liquidation that per HERA the entity and charter would transfer?
NOTE: This was to safeguard tax PAYORS who owned or purchased into the original entities securities regardless of when purchased or time of conservatorship release.

Mr. Director, taxpayers continued to buy shares expecting to see this pay back happen as planned by HERA. THE BILL states the companies will stay shareholder owned and that the entities and charters are to be kept. That then would include all securities of the original (GSE's) had prior to conservatorship. The final payback to the US tax payer for the bail out is the UNITED STATES GOVERNMENT to allow restoration of these TAX payer owned companies stocks to recover through reform, release, regulate and monitor.

I can not stress enough that many tax payers lost dollars from conservatorship as well the threat of receivership. This created a very low shareholder value and for all that was lost spawned new tax PAYERS invested their savings, college funds, retirement funds and other funds for inheritances into those publicly offered legal instruments of ownership (common stock shares).

Mr. Director of public record in the conservatorship tax payers (GSE's) securities were only subjected to suspended rights, given such rights up under the trusting in our government. That agreement of trust was to restore to a safe & solvent state and returned to the rightful original owner's shares, (which as explained now combines old & new tax payer share holders being restored as well reward for the risk taken in partnership with the US Government.

It is a little discouraging to hear statements by public officials regarding an intention to cut us taxpayers out our common stock rights. New bills pushing liquidation, wind down of entities verses the future restoration, release through reform, regulate and monitor previously agreed to.


Mr. Director can you tell me why tax payers are facing the threat of being cut out of our common share purchases?

It is clear from reading HERA temporary authorities and conservatorship documents that the suspension of all rights of common share holders was only during conservatorship. A clear priority of HERA regarding all future income was to reduce the debt and close out any securities/obligations toward that debt (thus closing out obligations to the US treasury). This would, in turn, increase the book value (by 187 billion dollars) and allow (according to HERA’s temporary authority, see: Treasury…Temporary Authority to Purchase Securities) the purchase of securities leading the path to self recapitalization of the (GSE's).

Mr. Director under HERA is it true FHFA reviews and sets the capital requirements of the (GSE's) and that you have sole authority over required and or regulated capital levels?

Mr. Director with over 1.5 billion shares traded last year, this very liquid security is helping grow and transform many minorities to middle class families who have now invested hard earned dollars buying the common share stocks of both (GSE's) or kept the shares they owned through a very extreme crisis.

Tax PAYORS Investing THIER own money back into their own (GSE's) or kept THIER money to be restored. US taxpayers are NOW already in partnership with the US government through these common shares and are benefiting by their increase in value over the last 4 years. Thus by maintaining the GSE's public stock, HERA enabled a sustainable public/government partnership that supports us the taxpayer, protects the Government, secures the 30 year MBS market and maintains growing MBS liquidity with continued access to the public capital markets. The greatest value to taxpayers was the promise to restore and release by HERA. The tax PAYORS were informed and allowed to invest in the bailout entities took the needed risks, and should now be able to grow in value with the safe & sound enhanced regulated model via the original common stock still still trading according to HERA.


Please refer to Sec 1117 & subsections:
(C) Considerations to (i) prioritize repayment to the government, (ii) limits on maturity or disposition of obligations or securities to be purchased, (iii) the corporation’s plan for the resumption of private market funding or capital market access, (iv) the probability of the corporation fulfilling the terms of any such obligation or other security, INCLUDING REPAYMENT, (v) The need to maintain the corporations status as a private shareholder company.

Please refer to HERA Restriction on Capital Distributions:
Page 79 of 260 subsection (E)
2 Exception subsections (A) and (B) states is made in connection with the issuance of additional shares or obligations i.e. (treasury draws) of the regulated entity in at least equivalent amount; and will reduce the financial obligations of the regulated entity of or otherwise improve the financial condition.

NOTE:
This means closing out the treasury senior preferred shares was clearly intended to pay monies out only to increase the book value of the (GSE's). Reducing or eliminating the need for recapitalization by further dilution or sales of new.

3. Would you or your office please update me regarding your plans to resolve the 17 lawsuits involving FHFA and the treasury on complaints ranging from overstepping bounded contractual rights to the validity of the conservatorship itself?
Note: As a concerned taxpayer I purchased common stock under those agreements since 2008/9 published government agreements with Fannie Mae and Freddie Mac conservatorship.

Additional questions due to legal matters above
HERA specifies an intent to keep the companies securities publicly trading.

A. Would you or your office please confirm whether this is still correct?

B. Will the Sweep Agreements be terminated after final payments total the value drawn under the senior preferred shares being paid to them? As well will this then close out all obligations to the treasury via HERA's priority of distribution as payback government first combined with reductions of any obligations to those securities?

Will future dividend draws settle any remaining 10% coupon costs associated with the senior preferred shares or is that no longer being warranted?

Will the GSE’s be maintained as a shareholder publicly owned company with all securities of original entities and charters per required by HERA?

E. Will the GSE's be maintained as publicly traded companies as required by HERA?

Under your leadership, will draws that were taken under HERA discretionary authority of the conservator opinion be reviewed now that public record shows this happen do to massive DTA's?


Please refer to HERA reviewing page 17of 260
Note: This section allowed the then acting current director to invest treasury draws in senior preferred shares at the directors discretion, but were not required to meet the then current working needs of the agency.


Mr. Director can you confirm to me in writing that HERA and the conservatorship documents are working according to the terms of agreement and that these companies will be restored?

Mr. Director will you have a plan to restore the (GSE') per the terms of conservatorship public documents that were released in 2008 and 2009? Will this plan follow the bill HERA which governs the temporary authorities of the US Treasury and FHFA's temporary authorities of conservatorship?

Many thanks in advance for your review and response

Sincerely,

Frank M. Fosco Jr.
Common shareholder
Fannie Mae & Freddie Mac

====================

version 2:

Version 2 common shareholder letter - please common on which better


Director Mel Watt’s Office
Federal Housing Finance Agency
400 7th Street NW
Washington, D.C. 20024

January 13, 2014

Dear Director Watt,
​Congratulations on your Senate confirmation and recent swearing in as the director of the Federal Housing Finance Agency (FHFA). Your confirmation comes at a critical time for both our economy and the future of the housing reform. Although I understand that the White House, Congress and the Senate are looking at the future of the government-sponsored enterprises (GSE) your leadership, background and legal expertise will help clarify the confusions we common share holders have regarding the current conservatorship and its direction prior to your confirmation.

As you know, the economic crisis was directly related to the mortgage crisis and caused congress to enact The Housing and Economic Recover Act (HERA) on Jul 30, 2008. H.R. 3221, (110th). It is to provide needed housing reform and for related purposes and temporary authorities. This bill includes THE specific language that defined procedures for managing the (GSE's) conservatorship.

It is also of public record that through the economic crisis no GSE was ever found to be insolvent at that time of conservatorship and or during anytime during the last 5 years.


Because of the substantial support provided by the GSE's to the housing industry and it's unique link to the treasury they were forced into conservatorship and used as tools enabling the government to stabilize and support the housing market collapse. Their unique support related the liquidity of the MBS market helped fuel the economy through massive monthly bond purchases

Of public record the (GSE's) were used to absorb toxic loans from some banks as well the (FHFA) demanded repurchasing of toxic loans creating artificial representations of the (GSE's) financial conditions during this time.
We tax payers also understand through public record that the FHFA settlements owed to Fannie Mae and Freddie Mac were originated from fraudulent bank loans sold to (GSE's) which were unknowingly purchased and converted into MBS bonds. These loans were from, fraudulently submitted loan papers (as well should be noted) many were combined with relaxed regulations that allowed subprime loans (from regulations passed by congress) to be required purchases. All these securities required the (GSE's) to purchase many toxic securities of unknown risk.

The goal was to heal and (NOT HURT) but restore, make better and safer, then the entities and charters is what HERA conserved. We tax payer understood these actions by FHFA were all to be effort to decreased toxic loan exposure, receive settlements from fraudulent loans stabilizing the housing financial industry but not always followed what was best for the (GSE’s).

These extraordinary efforts to stabilize did not (always) follow the authority of (HERA) even though all transactions were to be transacted only in a manner to increase the financial condition and to restore solvency to the (GSE’s).

Also of public record, was the massive down-turn of home values across many markets, creating massive (mark to mark) accounting losses. The devaluation of the housing sector combined with massive job losses created historically high foreclosures linked to many of the congressionally required purchases from unsustainable sub-prime loans.

These scenarios created massive asset losses (more paper losses than actual operating losses), which in turn (AGAIN) caused overly inflated and unwarranted draws from the treasury to the (GSE's). This was to keep (mark to mark) asset write downs categorized as assets in a positive net-worth for GAAP.

Also of public record the HAMP foreclosure prevention programs combined with foreclosure sales and refinancing operations of the (GSE's) proved to have been needed tools we must keep.

The (GSE’s) operations proved successful in dramatically reducing actual losses. However extreme circumstances required extreme measures & FHFA had the authority to take draws from the treasury, (and did so) that were unwarranted to the operational needs of the (GSE's) and were taken in the event of a catastrophic losses which could not be foreseen. 

As tax payers first and a shareholders second, we tax payers relied on the FHFA and Treasury authorities to operate under HERA. This is clearly defined in public record that any taxpayer could read HERA prioritized for an orderly pay back closing out treasury obligations through the use of prioritized dividends per HERA. 

Mr. Director, at the point conservatorship was initiated the common shares of each (GSE) were publicly offered as instruments of ownership, i.e. Fannie Mae and Freddie Mac common shares with suspended rights while under support of the conservator per HERA. I, as a taxpayer, was able to purchase via NYSE & OTC in the open market. As a taxpayer I read the known risks via HERA and the conservatorship documents. 

The purpose of these documents was to clearly fix, restore as well strengthen the GSE's with a capital plan to pay the government back first from restricted dividend payments prioritized to the treasury as a closing of all obligations and in combination, implement a capital plan for restoration and capital market access.
This is clearly stated and I am not a constitutional lawyer verses a US taxpayer.

AS A TAX PAYER & SHAREHOLDER
As you know Mr. Director, over the years Fannie Mae and Freddie Mac common stock has and continues to trade under the rules of conservatorship. These securities were, at that time, said to be worthless. But we tax payers believed that no better partner can a corporation have than the United State Government. 

• Because at that time the greatest risk was that the companies could have been placed into receivership the securities traded at a huge discount for all to purchase under clear terms

Mr. Director, this did and still allows many lower class and middle class taxpayers to acquire shares otherwise financially out of their reach with the hope and (RISK) the US government work make into a sound and solvent condition, per terms of the aforementioned agreements.

Clauses for receivership were never met, nor were the required public announcement provided to the Taxpayers buying these common stock shares in the open markets would have any chance of being taken away unjustly from US taxpayers.

HERA states clearly that the conservator (only) can convert from being a conservator into a receivership and or liquidation. That notices to the (GSE’s), and defaults triggers clearly defined for all us taxpayer to read purchasing the common stock shares would be protected from rogue bills being enacted without proper notice to taxpayers purchasing these securities. 

This was to safeguard taxpayers who owned or purchased into the original entities securities regardless of when purchased or time of conservatorship release.

HERA clearly states the companies will stay shareholder owned and that the entities and charters are to be kept. That then would include all securities of the original (GSE's) had prior to conservatorship.

The final payback to the US tax payer for the bail out is the UNITED STATES GOVERNMENT to allow restoration of these TAX payer owned companies (AND) stocks to recover through reform, release, regulate and monitor.

I cannot stress enough that many taxpayers lost dollars from the (IMPOSED) conservatorship created a very low shareholder value. But through great loss came opportunity and for all that was lost to spawn new tax PAYERS who now could invest their savings, college funds, retirement funds and other funds for inheritances into those publicly offered legal instruments of ownership (common stock shares).

That agreement to suspend rights was in trust was to restore to a safe & solvent state and returned to the rightful original owner's shares, (which as explained now combines old & new taxpayer’s shareholders being restored as well reward for the risk taken in partnership with the US Government

Mr. Director can you tell me why taxpayers are facing the threat of being cut out of our common share purchases from rouge bills being introduced?
Public officials intentions are to cut us taxpayers out our common stock rights. New bills pushing liquidation, wind down of entities verses the future restoration, release through reform, regulate and monitor previously agreed to.

It is clear from reading HERA temporary authorities and conservatorship documents that the suspension of all rights of common stock shares was only during conservatorship. A clear priority of HERA regarding all future income was to reduce the debt and close out any securities/obligations toward that debt (thus closing out obligations to the US treasury). This would, in turn, increase the book value (by 187 billion dollars) and allow (according to HERA’s temporary authority, see: Treasury…Temporary Authority to Purchase Securities) the purchase of securities leading the path to self recapitalization of the (GSE's).



INVESTED IN OUR GOVERNMENT:
Mr. Director with over 1.5 billion shares traded last year, this very liquid security is helping grow and transform many minorities to middle class families who have now invested hard earned dollars buying the common share stocks of both (GSE's) or kept the shares they owned through a very extreme crisis.

Taxpayers Invested THIER own money back into their own (GSE's) or kept THIER money to be restored. US taxpayers are NOW already in partnership with the US government through these common shares and are benefiting by their increase in value over the last 4 years. 

Thus by maintaining the GSE's public stock, HERA enabled a sustainable public/government partnership that supports us the taxpayer, protects the Government, secures the 30 year MBS market and maintains growing MBS liquidity with continued access to the public capital markets. The greatest value to taxpayers was the promise to restore and release by HERA. The tax PAYORS were informed and allowed to invest in the bailout entities took the needed risks, and should now be able to grow in value with the safe & sound enhanced regulated model via the original common stock still trading according to HERA.

Please refer to Sec 1117 & subsections: 
(C) Considerations to (i) prioritize repayment to the government, (ii) limits on maturity or disposition of obligations or securities to be purchased, (iii) the corporation’s plan for the resumption of private market funding or capital market access, (iv) the probability of the corporation fulfilling the terms of any such obligation or other security, INCLUDING REPAYMENT, (v) The need to maintain the corporations status as a private shareholder company.
Please refer to HERA Restriction on Capital Distributions:
Page 79 of 260, subsection (E)
2 Exception subsections (A) and (B) states is made in connection with the issuance of additional shares or obligations i.e. (treasury draws) of the regulated entity in at least equivalent amount; and will reduce the financial obligations of the regulated entity of or otherwise improve the financial condition. 

Sincerely,

Frank M. Fosco Jr.
US Taxpayor
Common Share Owner
Fannie Mae and Freddie Mac

Additional questions due to legal matters above
HERA specifies the intent is to keep the companies securities publicly trading. 
• Would you or your office please confirm whether this is still correct? 
• Will the Sweep Agreements be terminated after final payments total the value drawn under the senior preferred shares being paid to them? As well will this then close out all obligations to the treasury via HERA's priority of distribution as payback government first combined with reductions of any obligations to those securities?
• Will future dividend draws settle any remaining 10% coupon costs associated with the senior preferred shares or is that no longer being warranted?
• Will the GSE’s be maintained as a shareholder publicly owned company with all securities of original entities and charters per required by HERA?
• Will the GSE's be maintained as publicly traded companies as required by HERA?
• Under your leadership, will draws that were taken under HERA discretionary authority of the conservator opinion be reviewed now that public record shows this happen do to massive DTA's?
• Is there or will there be a capital plan developed in 2014 for a return to the private markets and ending conservatorship?
• Do you agree that the warrant agreements attached to the GSE’s conservatorship (although still within the 20 year period) cannot be executed because HERA’s temporary authority to purchase securities defined as equities (HERA see section 1117) specifically states authority to purchase securities other than for bailout purposes ended December 31, 2009?
• What is your position on priorities to ongoing quarterly income sweep draws ONCE repayment to the treasury has been completed

In Summary:
The housing market has stabilized and begun to recover, and Fannie Mae and Freddie Mac have rebounded and returned to profitability. The agreement to suspend shareholder rights in exchange for extraordinary use of the GSE was to process:
• to process fraudulent loan buy-backs;
• to create MBS fraud settlements;
• to stem foreclosures and process management; and
• to absorb over estimated (mark to mark) accounting losses. These creating large paper losses, and creating draws from treasury but were on non-operating losses. These paper losses are the DTA’s being used to send the money back paper losses only due to the then GAAP accounting rules.

Since the end of 2011, neither Fannie Mae nor Freddie Mac has had one single quarter in the red. Both GSE’s have virtually returned all the bailout funds in 3rd quarter 2013, and will have fully repaid the treasury based on HERA’s temporary authority.
I am just one of thousands of US taxpayers who invested in the Fix and Restore agreement the US Treasury and Congress made with both GSE’s. We are tax paying citizens that span across our great land representing many 1000's of taxpayers from various backgrounds ranging from minority to middle class Americans.

• We now proudly own original entity/chartered bailed out common stock. Over 21% of the common stock is now owned by mutual and or hedge funds and still owned by many retirement and elderly funds.
• We taxpayers invested in the trust of the US government to fix these two organizations.
• We taxpayers trusted that being told the Priority of any funds paid out of profits was to us (the taxpayers/treasury obligations) and then the organizations would be fixed to a safe and sound condition and put back into the public markets originally taken from AND back to the original securities regardless of time of purchase. All of us tax PAYORS (common folks) common share holders believed in this partnership