at a cursory glance, these things look good. i’ve spent hours studying and looking at AIG, so i am the most comfortable with that one, the structure for freddie and fannie, i mean, holy cow there are so many series of preferreds.. haha… but overall i have my arms around the basic understanding of the whole thing, no idea about the robustness of their cash flows, sounds like a lot of it is contingent on congress, but i believe in the status quo, the show tends to go on.
who knows… looks like a bet worth making.
https://groups.google.com/forum/#!topic/freddienfannie/Whh1Cm9Jddc
To get things started, I’m going to cover some of the basics, lol. I’ll try to be “neutral” and avoid regurgitating some of my pet theories.
#1. Freddie Mac Preferred Stock Ticker Symbols
FMCCG.OB FMCCH.OB FMCCI.OB FMCCJ.OB FMCCK.OB FMCCL.OB FMCCM.OB FMCCN.OB FMCCO.OB FMCCP.OB FMCCS.OB FMCCT.OB FMCKI.OB FMCKJ.OB FMCKK.OB FMCKL.OB FMCKM.OB FMCKN.OB FMCKO.OB FMCKP.OB FNMAS.OB FREGP.OB FREJN.OB FREJO.OB FREJP.OB
I think this is the complete list, but check here, just in case. http://www.freddiemac.
#2. Variable Rate preferred stocks
FMCKJ.OB FMCCS.OB FMCCJ.OB FMCCN.OB FMCCM.OB FMCCL.OB FMCCG.OB FMCCI.OB
Some of Freddie Mac have a variable rate, that is, they “float” based on some index, say Libor or two-year Treasury bonds. Not saying you should avoid them, but if the dividends were ever restored, these preferreds would play a low dividend based on current market conditions.
#3. Prospectuses
The prospectuses for the preferreds are available here, just hit the link for the one you want to look at.
http://www.freddiemac.com/
The preferreds have a redemption value of either $25 or $50. I believe they are all non-cumulative, meaning that the dividends that would have been paid during the September 2008 to present period are gone forever. Our preferreds are non-cumulative, which makes them quasi-equity, while cumulative preferreds are more like quasi-debt. By being non-cumulative, quasi-equity, they could be considered “core capital.” The preferreds were “Tier 1” capital, which made them a favorable investment for commercial banks and similar investors, prior to the events in Sept 2008.
#4. Financial Statements
Freddie Mac financial statements are available here.
http://www.freddiemac.com/
They also provide an “investor presentation–Freddie Mac update update, which they update around the middle of each month
http://www.freddiemac.com/
They had decent earnings in the first quarter, which one hopes will be the sea change we’ve been waiting for. But do your own due diligence!
#5. FHFA is the regulator and conservator
Their website is here
http://www.fhfa.gov/
A lot could be said here about the FHFA and their dual role as both regulator and conservator.
#6. Stress Test Document
In October 2010, the FHFA released projections showing range of potential drawns for Fannie Mae and Freddie Mac
http://www.fhfa.gov/webfiles/
This is a good summary of the “macro” situation facing Freddie Mac. Figure 3 shows the projected combined cumulative Treasury draws for both enterprises.
One interesting thing is that Freddie Mac has done better than Scenario 1, which was the “best case” scenario. Also, note that Freddie Mac seemed to be in a better situation than Fannie. The impression this gives is that Freddie is essentially a year or two ahead of Fannie Mae, in terms of recovery.
But do your own due diligence!
#7. FMCKJ and liquidity of the preferreds
FMCKJ is generally viewed as the most liquid of the preferreds. 240,000,000 shares were issued circa late 2007, I believe.
Thus, FMCKJ is pretty easy to buy, not a wide bid-ask spread, etc. But its a bit price-y so FLCKI and FLCKL might be options if you are in a hurry to build a basic position.
There was a stockholder suit re FMCKJ but I believe that that suit failed (FHFA as conservator told the Court that Freddie Mac had met its disclosure requirements, when the FMCKJ shares were issued). But, I’m not a lawyer.
The $50s tend to be cheaper but harder to buy. Not to say that you can’t build positions in them, but one would need to be patient.
One place to pull market data is here
Provides quite a bit of info re depth and so on. But, I’m not a trader so take that with a grain of salt.
# 8. Value Proposition
http://www.marketwatch.com/
‘The securities “could be an 8 to 10 bagger from here,” This means the preferred shares are potentially worth a lot more, he explained. “The preferreds still trade at 8 cents on the dollar, it’s crazy,” Bass said.’
Starting at 8%, an 8 to 10 fold increase would take you to 64% to 80% of redemption value.
The preferreds are now at about 10 percent on the dollar, not eight.
#9. Recent History
Delisting from NYSE
Freddie Mac Notifies NYSE of Intention to Delist
http://freddiemac.mediaroom.
Freddie Mac Announces Shares of Company’s Common and Preferred Stock to be Traded on OTC Market
http://freddiemac.mediaroom.
Election [Suffice it to say there was a lot of “Kill Freddie” talk before the Nov 2010 election, which has subsided]
Tsy Report, February 11, 2011
Treasury Report Calls for Winding Down Fannie, Freddie
http://www.bloomberg.com/news/
You can access the full report here
http://www.treasury.gov/
The press release is here
http://www.treasury.gov/press-
Other recent events
House bills
Senate activity
Progress with TARP
#10. House Bills
The list of committee members is here
http://financialservices.
The HR 1182 and HR 839 bills are here [Not all of the recent ones have yet been posted]
H.R. 1182, the GSE Bailout Elimination and Taxpayer Protection Act
H.R. 839, the HAMP Termination Act
http://financialservices.
You can view the March 31, 2011 House Hearing here
http://financialservices.
You can get the gist by watching the last 15 minutes. Bottomline: Rs are talking about “killing Freddie” but likely won’t have the votes to do anything radical. Some winding down over a period of 5 to 7 years seems likely.
Info on the April 5-6 markup sessions is here
http://financialservices.
Bottom line: probability of a “bad” outcome is becoming lower and lower over time Less
Senate Banking Committee
The members list is here
http://banking.senate.gov/
Info on the Housing, Transport, and Community Devt subcommittee is here
http://banking.senate.gov/
The upcoming May 18th Hearing on the Future of Securitization is here
http://banking.senate.gov/
The March 29 Hearing on the Future of the Housing System is here
http://banking.senate.gov/
The March 9 Hearing on the State of the Housing Market is here
http://banking.senate.gov/
Bruce Berkowitz Is On Board:
Bruce Bekrowitz’ Fairholme Capital is on board to help with the restructuring of these state owned mortgage giants. The press release emphasizes that privatiziation of these mortgage financiers will be instrumental to the economic well being of the nation and will also lower costs and increase home ownership. The statement also says that there is no alternative to Fannie Mae and Freddie Mac, as both purchase or insure 60 percent of mortgages in America.
Bruce Berkowitz Pushes For Privatization In Press Release:
Bruce Berkowitz is not the only famous shareholder of Federal National Mortgage Association (OTCBB:FNMA) and Federal Home Loan Mortgage Corp (OTCBB:FMCC) who is campaigning for restructuring and privatization. John Paulson, Richard Perry and Claren Road Asset Management (majority stake of Carlyle Group) have forwarded the same agenda. In fact Paulson has been the front-runner of the hedge fund lobby that is pushing for restructuring and privatization, a move that has been given a cold shoulder from the government so far. He has met with Senate Banking Committee and with members of the House of Representatives. Both Democrats and Republicans have called for liquidation of these mortgage giants, so hedge funds have tough competition to beat here.
Fairholme argues that taxpayers’ money which was used to rescue these companies at the time of crisis can be repaid if Fannie and Freddie are restructured. The statement discusses equal treatment of all shareholders and wants dividends to be reinstated, calling it the “American way to do things.”
We look forward to a lot more activity on the lobbying side in the coming months, as hedge funds push for a reincarnation and government insists on burial of the mortgage giants.
Fairholme Issues Statement on Fannie Mae and Freddie Mac Preferred Stock
MIAMI, Jun 03, 2013 (BUSINESS WIRE) — Fairholme Capital Management announced that its clients, including mutual fund shareholders of The Fairholme FundFAIRX +2.20% and The Fairholme Allocation FundFAAFX +1.53% , own approximately $2.4 billion par value ofFannie Mae and Freddie Mac Preferred Stock and are ready to help with a restructuring that accelerates the return of meaningful investment to the secondary mortgage market.
Privately-owned Fannie Mae and Freddie Mac are critical to our nation’s economic security, lowering the cost and increasing the availability of homeownership.
There are no substitutes. Fannie and Freddie currently purchase or insure 6 out of every 10 home mortgages in America. Today, they are stronger than ever – enabling the United States Treasury to rapidly recoup its temporary emergency investments in both entities.
Taxpayer dollars expended by the government during a time of national crisis will be fully repaid. And equitable treatment of taxpaying shareholders, including community banks, insurance companies, and mutual funds holding Preferred Stock, must be restored with dividends reinstated. Repaying taxpayer investments, restructuring government guarantees, and restoring shareholder property are not mutually exclusive. This is the American way.
The time to restructure Fannie and Freddie is upon us. Sustaining our nation’s economic recovery requires it.
On behalf of the hundreds of thousands of Fairholme Funds shareholders who helped to rebuild American International Group, Bank of America, CIT Group, General Growth Properties, MBIA Inc., and others after the Great Recession – we stand ready to do our part.
Investing in the Funds involves risks including loss of principal. The Funds’ investment objectives, risks, charges, and expenses should be considered carefully before investing. The prospectus contains this and other important information about the Funds, and it may be obtained by calling Shareholder Services at 1-866-202-2263 or visiting our website www.fairholmefunds.com. Read it carefully before investing.
For a copy of the top holdings for The Fairholme Fund, The Fairholme Focused Income Fund, and The Fairholme Allocation Fund please click here. Portfolio holdings are subject to risk and may change at any time.
http://cts.businesswire.com/ct/CT?id=bwnews&sty=20130603005922r1&sid=cmtx6&distro=nx
SOURCE: Fairholme Capital Management
Bruce Berkowitz Amasses $2.4 Billion of Fannie, Freddie Preferreds
Fannie Mae and Freddie Mac are still hot stocks and Bruce Berkowitz is ready to help with increasing shareholder value for himself and others. This was the crux of the latest press release issued by Fairholme Capital Management. The firm’s mutual funds and clients own a bulky $2.4 billion of Federal National Mortgage Association (OTCBB:FNMA) and Federal Home Loan Mortgage Corp (OTCBB:FMCC)’s preferred shares.
Bruce Berkowitz Is On Board:
Bruce Bekrowitz’ Fairholme Capital is on board to help with the restructuring of these state owned mortgage giants. The press release emphasizes that privatiziation of these mortgage financiers will be instrumental to the economic well being of the nation and will also lower costs and increase home ownership. The statement also says that there is no alternative to Fannie Mae and Freddie Mac, as both purchase or insure 60 percent of mortgages in America.
Bruce Berkowitz Pushes For Privatization In Press Release:
Bruce Berkowitz is not the only famous shareholder of Federal National Mortgage Association (OTCBB:FNMA) and Federal Home Loan Mortgage Corp (OTCBB:FMCC) who is campaigning for restructuring and privatization. John Paulson, Richard Perry and Claren Road Asset Management (majority stake of Carlyle Group) have forwarded the same agenda. In fact Paulson has been the front-runner of the hedge fund lobby that is pushing for restructuring and privatization, a move that has been given a cold shoulder from the government so far. He has met with Senate Banking Committee and with members of the House of Representatives. Both Democrats and Republicans have called for liquidation of these mortgage giants, so hedge funds have tough competition to beat here.
Fairholme argues that taxpayers’ money which was used to rescue these companies at the time of crisis can be repaid if Fannie and Freddie are restructured. The statement discusses equal treatment of all shareholders and wants dividends to be reinstated, calling it the “American way to do things.”
We look forward to a lot more activity on the lobbying side in the coming months, as hedge funds push for a reincarnation and government insists on burial of the mortgage giants.