Without a shadow of a doubt this proves that people are amazingly stupid. One way or the other.

That was proven beyond a reasonable doubt years ago.

I've got no skin in the game at all on this one, and you know my take on the odds, but I will be really really happy if you are on the right side of this one.

Not sure if you're talking about the stock or housing prices, but I know the housing prices thing is just downright weird. What they are asking for is laughable, but they are getting it, so they push the limit. Rates are so cheap you can afford a more expensive home since people only care about the payments.

Me and my wife are thinking of buying a home but knowing interest rates can only go up, not down, and put downward pressure on prices in the future makes me not want to buy. It's just crazy all over again. We just went through this 5 years ago wtf?

So find a house that is close to the last sale price adjusted for inflation. They are out there.

Interest rates are crazy. I just got a 1.9% 5 year fixed second mortgage for investment purposes, since that is just ridiculously cheap money.

Even if my present house price were to go down, the fact that my first and second mortgages are fixed mortgages below the typical rate of inflation (3%), I'm not too worried. I don't think that mine would, since I got it for 5% higher than last sale price (1995) adjusted for inflation.

Thanks. I'm seriously thinking about starting a blog that has advertising on it to supplement my losses. Then when I lose my entire investment I'll have an asset left in my profound writings on the subject.

It will not matter that I was amazingingly wrong and that I made a statement about people being proven stupid by the price action in FNMA in the fourth week of May in the year 2013. What will matter as I pour over lawyers briefs for the inevitable lawsuits against the Treasury department or the US government proper, will be that I had the foresight to conjure up paragraphs with words in them that detailed my experience.

Yeah I gotta say assuming FNMA doing well= housing market doing well I'll make an absolute killing if northeastbeast is right about this. I mean ffs I own a decent chunk of an mREIT+ a multi unit residential REIT. (both of which have grossly underperformed since I bought them... not in the red but compared to the SPX they're a joke)

Hope someone in here is daytrading these dips

You could guess right a few times in a row with this crazy stock, you could make tons.

Unfortunately, I've guessed wrong twice.

(I'm still in the game though!)

The funny thing is that some people will take this to mean that the common stock shareholders get something:

The important thing is that we already knew that they were in the process of writing the bill. This isn't really anything new, and it is just a bill up on Capitol Hill.

Check out this link https://petitions.whitehouse.gov/pet...lders/vYQfrKHP

Is this link right? I'm getting nothing

It's correct.

https://petitions.whitehouse.gov/pet...state/QXMgW37M

wil let's be honest. Even if you had invested money in FNMA, the chances you would have stuck with this stock this long are virtually nil, and then, if you had, the chances you would have sold at the peak are also virtually nil.

You are having some buyer's remorse for not buying a stock a long time ago that you had no business buying (but had some thoughts about), and now that you see it is up some, have some regrets although even if you had bought you probably would not have shown a profit.

I know. I said that already. I'd have dumped it around 2 bucks I think. I watched it jump up from .30 cents to a dollar a few times and back down again. If I'd have gotten really lucky I'd have maybe stayed in til around 3 bucks.

Just weird I had 15k shares and am unsure why I sold it. Just complaining.

If Corker's plan is the worst case scenario you can still estimate what the outcome will probably be. I come to the conclusion that there will be money left for the common shareholders. It's a five year liquidation plan in an appreciating housing market. With the lawsuits I estimate that Fannie Mae would have 50 billion left as a conservative figure.

Of course there could be nothing left for the common shareholders if they handle the liquidations badly or if conditions change. It will probably be a wild ride until they take a clear position and the outcome becomes more clear. I think the lack of clarity is bad for the economy. But the politics are too embedded into this thing for them to see the harm the politicizing of it is causing.

The article actually doesn't articulate that exactly. I'm not saying you're wrong, I'm saying you can't definitively derive that from what is being said in that article.

Dude I've basically never asked this of anyone... But show your ****ing work. Your assertion here that 50B is a conservative amount left over is a pretty bold statement.

EDIT: I'm mean you're basically telling us that fundamentally worst case this is a 4 bagger. If you can make any kind of convincing argument it'll be one of the better stock picks posted on 2p2. I suspect you're just pulling it out of your ass though.

Well I'll start off by saying that a liquidation of the GSE's as proposed contains a number of unknown factors. Those factors while unknown can be predicted within the range of possible choices that would exist at the time the choices had to be made.

Legislation to liquidate the holdings of the GSE's without adhering to the agreement, or spirit of the agreements entered into at the initiation of the conservatorship, would almost certainly result in legal action. That legal action would probably be successful to some degree. Depending upon how successful it could result in significant liability for the government.

The liability to the government would not just be contained within potential judgements that might happen on a monetary level. It might result in unforeseen and unintended consequences for the housing market and the greater economy. It could even affect the credit rating of the United States itself if instability in the housing market were to resume as a consequence of the effects of the actions.

The disposition of the default insurance(guarantee fee's) contracts at the end of the wind down would probably create significant disruption and uncertainty in the markets if handled poorly. Just logistically the completion of the end phase of the process would probably add another 2 years delay minimum on top of the proposed five year timeframe for the wind down.

Realized market values for assets might become a potential problem for the government if they are below market value and affect the potential recovery of the classes of shareholders that remain.

If determined to do so, a lower risk wind down would probably require 7-10 years with explicit signals to the market at each step of the process in order to minimize the tail-risks mentioned.

Assuming interest rates are increased sometime in early or mid 2014 I can guess that would rein in housing market appreciation to comfortable and sustainable levels that would probably correspond to just above the rate of inflation. This is assuming gradual increases in interest rates and a continuation of the currently strong underwriting standards on mortgage originations.

I estimate unemployment between 5.8-8 percent throughout the entire period of time. Although elevated it is probably the most reasonable range for monetary policy to target considering potential inflation risks.

In such a scenerio with good realized prices in the markets Fannie Mae should have the potential to generate 30-50 billion in free cash flow per year over the next five years. This assumes lawsuit settlements at 40 percent of the potential recovery with the 16 remaining banks it has pending litigation with/against. That 80 billion dollars will be remitted to the company potentially over a number of years and some of that recovery could even exceed the wind down time frame that has been proposed in Corker's bill.

The current liquidation preference for Fannie Mae is 117 billion. They just made an 8.1 billion dollar profit just coming out of this thing. So let's be real conservative and say that won't continue and they will only average 5 billion dollars a quarter from now on even with the lawsuits.

That's 4x5x5=100 billion. The profit comes when they sell off the guarantee fee contracts. They are currently charging an average of .48 basis points to guarantee a mortgage. Those contracts would have to be sold as a form of Treasury bond because the Treasury would be assuming the liability for a mortgage default. A .48 guarantee amount over a 3 trillion dollar portfolio generates abouts 15 billion per year in income annually. At current interest rates on a 30 year treasury bond it would cost a buyer about 100 billion to assure themselves 3-4 billion in income. To assure 15 billion income those contracts would have a market value of 400 billion at current 30 year interest rates. But let's be conservative and say they can only sell them for 100 billion.

17 to the senior preferred
10 billion to the junior
73 billion to the common

Even if they can't or do not want to market them that way they have to offer fair compensation for them.
So in reality a liquidation is an awful deal for the taxpayers because they end up having to give back as much as 3x the amount of money they just got back and on top of it they have to assume the risk of the entire mortgage market.

The proposal is to:

1) sell all assets.
2) settle all debts. (right now this would leave them with 6 billion for the next step)
3) pay off the senior preferred shares at par value if they have enough money left to do so after #2 (or whatever they have if it is less than enough). The par value of these is 117 billion.
4) pay off the junior preferred value at par value (or the total of whatever is left if they can't) if they have any money left after #3. The par value of these is a little over 19 billion.
5) give whatever is left after #4 to the share holders.

Just a couple of small issues:

The spirit (and letter) of the agreement is that FNMA gets wound down. The proposal is just for a specific timeline.

That makes no difference to share value. Congress is permitted to make laws that you don't like.

Every single penny of earnings goes to pay the senior preferred dividend no matter what the source of the earnings. They could make a quadrillion dollars in a quarter and it would not help the company.

Change in net value = earnings minus dividends. Since, for FNMA earnings = dividends (by their agreement), there cannot be a positive change in net value.

No. Any earnings they have do not reduce the amount they need to pay the sr. preferred shares and the jr. preferred shares have a par value of 19 billion.

117 to the sr. preferred
19 billion to the jr. preferred if there is anything left after paying the sr. preferred

That isn't true. There is no law or legal precedence that even suggests this. In a liquidation, the law is that bond holders must be paid off in full first before anyone else gets a penny. The existing law is that sr. preferred shares must be paid off by the company at par value before the jr. preferred shares get a penny. The existing law is that jr. preferred shares must be paid off in full at par value by the company before common stock holders get a penny. This isn't new law. It is how liquidations happen by law.

FWIW, I do agree that it would be a bad idea to liquidate, but the sr. preferred agreement doesn't allow them to do any of the things you suggest will happen. This thing passes and you are screwed. If nothing changes in the current sr. preferred agreement, you are screwed. What needs to happen for you to be ok is a change in the sr. preferred contract (bad for taxpayers to change the agreement, good for you if they do), or for different legislation to happen that essentially gets them out of having to pay on their current terms (again, this would be bad for taxpayers, but good for you).

http://en.wikipedia.org/wiki/Eminent_domain

Executive Order 13406

http://en.wikisource.org/wiki/Executive_Order_13406

Executive Order 12630

http://en.wikisource.org/wiki/Executive_Order_12630

None of this applies. A liquidation is not a seizure of assets. Also, FNMA was already seized by the government when it was worth far less than $0.

The fair liquidation value of the common shares is assets minus liabilities minus sr. preferred share par value minus jr. preferred share par value (the law is very clear on the order that assets are distributed in a liquidation). At the end of last quarter this equaled about negative $43/share.

As I said before, there is a reason why the hedge funds are buying up the jr. preferred shares and not touching the common stock.