Clark6290
2 hours ago
U.S. mortgage holders are sitting on record levels of home equity, casting a spotlight on their willingness to tap this wealth as expected rate cuts make equity utilization more affordable. Americans with mortgages held $17.2 trillion in home equity at the end of Q3 2024, or $11.2 trillion of ‘tappable equity’—the amount homeowners can borrow against while maintaining a healthy 20% equity stake in their home—according to ICE’s mortgage, property and home price data. Real information, no Booms or 3:10s. For all you renters and your 100 shares of FMCC, good luck lol.
Entire article: https://www.cnbc.com/advertorial/2024/12/04/could-anticipated-rate-cuts-lead-to-more-home-equity-lending.html?utm_campaign=NativeTout2&utm_source=Polar&mvt=i&mvn=beaa5ba5492b4678bcac1c809297404a&mvp=NA-CNBC-11239420&mvl=%20%5BNativeRiver%5D
mrfence
2 hours ago
Fresh lawsuits will thwart ROL GUY speculations. The incoming Administration needs to settle suits and wants to giterdone without delay for big picture reasons both public, and private. The chump change raised by Warrant exercise pales in comparison to Tariffs on China, Canada, Europe etc. They don't want the release bogged down by courts. Remember when SM stated release will be difficult with the active suits? He was right about that if nothing else.
The GSE'S cost the taxpayer $0, has paid all of FHFA's costs to exist, and returned a handsome profit to the taxpayer. They're worth more to Gooberment paying taxes on their profits outside of conservatorship.
navycmdr
2 hours ago
Reconciliation and the GSEs
Why the Trump 47 Administration Might Want Congress to Authorize a GSE Recap/Release Through Reconciliation Even When It Can Proceed Administratively Without Congress
Rule Of Law Guy - Dec 27
I suspect that the Trump 47 Administration will proceed administratively soon after inauguration to recapitalize and release the GSEs from conservatorship. This will involve a complex mix of transactions involving the GSEs, FHFA and Treasury whereby, among other things, (i) Treasury will monetize its investments in the GSEs through stock sales, (ii) the GSEs will implement capital raising plans involving a series of public stock offerings, and (iii) FHFA will suspend the overly-restrictive Enterprise Regulatory Capital Framework, either permanently or by consent decree.
None of these actions require Congressional authorization or participation. HERA, the statute Congress passed that created FHFA and authorized Treasury to coerce the GSEs to enter into conservatorship, also authorizes FHFA on its own initiative to release the GSEs from conservatorship. As for Treasury, it has authority to deal with its GSE investments as it pleases without Congressional approval. Look to Treasury sales of its financial institution bailout investments after the Great Financial Crisis.
So why do I suspect that the Trump 47 Administration will also seek to have Congress authorize the GSE conservatorship recap/release even as the administration proceeds independently? Why seek Congressional blessing of an administrative recap/release?
Three words. “Reconciliation”. And “pay fors”.
Bloomberg recently reported that “[t]he possible privatization of Fannie Mae and Freddie Mac is getting fresh attention from investors thanks to a handful of recent developments, according to a note by JPMorgan dated Dec. 20.
A draft bill that would attach privatization to a future reconciliation bill has caught investors attention, write strategists Nicholas Maciunas, Alex D. Kraus, Sanjana Prasad, and David Kaminsky.
The draft bill calls for Treasury to wipe out its senior preferred stake in the GSEs within 90 days of passage, exercise its warrants on the common stock, sell the resulting common stock and release the GSEs from conservatorship within two years.”
(The JP Morgan research note went on to express its view of the damage this might do to the mortgage securitization market, which I choose to leave out presently, given JP Morgan’s bald faced bias as an investor/dealer in MBS.)
Reconciliation is a process by which each chamber of Congress passes a joint budget resolution authorizing the various congressional committees in the House and Senate to adopt legislation implementing the resolution through budgetary spending legislation. The substantive policies that give rise to this new spending authorization are included in the reconciliation bill. See this explainer by the Committee for a Responsible Federal Budget.
The special sauce of reconciliation is that the Senate can end debate, or filibuster, and force “closure” on a reconciliation bill with a simply majority vote, as opposed to the typical Senate 60 vote majority. It is the method for the party that controls POTUS, the Senate and the House to fast track spending and budgetary legislation, and the substantive legislative policies that underlie these budgetary decisions. The Senate’s “Byrd Rule” requires that no pure policy legislation can be approved through reconciliation; but policy provisions that are incidental or give rise to the budgetary provisions are permitted to be added.
For example, early in the Trump 47 administration, one can expect legislation authorizing substantial monetary authorization to pay for immigration reform, such as deportation of illegal alines, improved border security and various other related initiatives. The various substantive immigration policy reforms giving rise to these spending requirements will also need to be approved. While a simple immigration policy reform divorced from budgetary spending authorization would require a 60 vote Senate passage, tucking that same substantive policy reform into reconciliation as the basis for budgetary authorization to pay for reform requires no more than a 50 vote Senate passage (with the VPOTUS breaking any 50 vote tie).
So reconciliation is a big deal for the Trump 47 administration to achieve its policy goals (as it was for the Biden administration when the Democrat Party controlled both the Senate and House).
trunkmonk
3 hours ago
they will also weight how long they can drag it out in court as well after the fact, I know of lawyers just waiting for such a gold mine of rewards coming from the governments laser focused greed and theft. At the end of the day, wall street will decide IPO price and livable dilution, none will come if FHFA and Treasury to do what they did ever again. that has to be ironed out. balance between greed and truth, with as little risk as possible to markets. muck it up like SM,MC, and Mad Max lead congress did by adding higher standards, more risky loans, and death spiral financing on the way out the door while trying to dump on markets would prove fatal in any housing crisis, and cause markets to collapse with lack of trust.
jwood9207
3 hours ago
The guaranty fees charged by Fannie and Freddie are several times higher now than before the GFC. If the GSEs are released, and their capital requirements restored to what they had before the financial crisis, their fees would be drastically lower. Mortgages would be available for fewer points, and loan payments would be less. Guarantee fees affect both the points charged at origination and the monthly mortgage payment.
The big banks will fight this like hell. (I'm sure they are well represented on this board.) They cannot stand it when Fannie and Freddie undercut their mortgage business. This whole damn thing started because Paulson did a favor for his banking friends.
Tim Howard's book, The Mortgage Wars, should be required reading for anyone on this board. As well as his blog,
https://howardonmortgagefinance.com/
There is a ton of great information there.
DaJester
4 hours ago
85% chance the seniors are converted (in which case the warrants don't matter), and 15% chance the seniors are written down (in which case I think there is a 100% chance of the warrants being exercised). This isn't that hard.
What I'm hearing you say is:
- 85% chance the seniors are converted to common, and they will take between 90-95% equity
- 15% chance the seniors are not converted, in which case they will use warrants to take 80% equity
- 0% chance that something other than these two scenarios happen
You are giving 100% probability to an 80-95% window. No new/revised senior agreements based on future dividends or commitment fees, no partial exercising of warrants, no partial conversion or write-down to take a lower percentage than 90, just 2 scenarios and that's it.
Regardless of scenario 1 or 2, you just need to state a % chance that JPS will get 90%+ of par, and then we can sticky this to see how accurate you are.
In a continuous probability distribution the probability that the random variable takes any specific value is zero, but the probability it takes a value in an interval can be positive and computable.
This isn't a random variable. Nobody is going to spin a wheel to determine how much equity the Treasury decides to steal. This will be a directive and decided by half a dozen people, or maybe less.
DaJester
4 hours ago
The point of discussing investments on a stock message board like this one is to make money. Empty threats of lawsuits, or the even worse constant whining about illegal activity with no intention to file a lawsuit, does not advance that cause at all. It's just useless virtue signaling.
OMG - No, just stop embarrassing yourself. First, nobody should be investing based on what they read on this stock investment board. Everyone should do their own due diligence. Second, the discussions are for thoughts on investment theories, industry news, economic influences, and relevant events that help us to make money. It is NOT actions of what we have or haven't done in the court system. When you or I invest, it is based on rationale thought, not outside action. If I needed to file a lawsuit in order to invest in this or any stock, I would not be in the stock market.
Treasury converting the seniors to non-cumulative doesn't help with the CET1 capital requirement in the ERCF. Only writedown and/or conversion to common does.
So we agree that a write-down would also be helpful, not just conversion.
The difference between the juniors and commons is that the commons have no protection against any sort of haircut; they have no contract-specified value to fall back on like the juniors do
Exactly. And Commons don't have a PAR ceiling either. Which is why they trade differently than the JPS. Someone looking for more security at the expense of upside would invest in JPS. You keep explaining this like we don't understand. We get it - you like the security of the JPS. Not everybody thinks like you.
Treasury not wanting to kill FnF anymore is not at all the same as them being willing to give up their equity to the benefit of current shareholders
The question is how did they obtain all that equity? By using one-sided agreements with the intent of making it so that the GSEs could never stand again. That is what is changing. The agreements MAY get amended or revised because the equity doesn't serve that purpose anymore and may be written down.
The full LP is potentially worth more than 100% of the companies' market cap anyway, so Treasury would have to take some sort of haircut one way or another.
Woah... So wait, Treasury has to take a haircut so that your JPS can be valid at par or near-par? Says who? Your words: Every dollar they allow current shareholders to keep is one fewer dollar in their pocket. But apparently this doesn't apply to your investment, just those that invest in common. What a joke. Treasury could wipe you out just as easily as common and just start over.
Ackman's thesis for investing in the common is that the warrants give Treasury a reason to align their incentives with the legacy commons: a higher share price helps both parties... Ackman said in the past that he's crossing his fingers that Treasury exercises the warrants: he knows the alternative is worse
Please explain the rationale why I would believe your investment thesis over that of Ackman? Are you as involved with the GSEs and the upcoming Administration? Please enlighten us!
skeptic7
4 hours ago
But then you have to determine who's an investor, who's a corporation, who's an institutional owner, etc. It gets murky because a "mom and pop" landlord who own 1 (mayyyyyyyybeee 2 house) can incorporate on the advice of their accountant, so do they fall into your "corporate ownership" formula? Can folks that own just 1 home but incorporate because they are frequent airbnb hosts (and claim income as such to be recognized as landlords) qualify? There are so many variables to be discussed, I think it's too cumbersome to break down merely by "corporate ownership". The ones that I think (in my humble opinion) that many people are alluding to when this argument is put forth are institutional owners (100 or more DU's), and that figure is well below 5% total.
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QueenVic
4 hours ago
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