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Quickly catch up on what is happening with the stocks you own and which companies everyone is talking about today.
Discussion with GSE investor that attended the HARP event sponsored by FHFA in Miami.
Additional Info at ValueWalk: Ackman Q3 Letter: Recent Developments At Herbalife Ltd. (HLF) Reinforce Our Short Thesis. (In PDF Form additional info. available on Fnma/Fmcc)
Investments that drove up Pershing Square’s return in the third quarter included Herbalife Ltd. (NYSE:HLF), Canadian Pacific Railway Limited (NYSE:CP) (TSE:CP), Allergan, Inc. (NYSE:AGN) and Burger King Worldwide Inc (NYSE:BKW). Howard Hughes Corp (NYSE:HHC) and Platform Specialty Products Corp (NYSE:PAH). Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) contributed negatively to the third quarter returns according to the most recent investor letter, a copy of which was obtained by ValueWalk.
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Bill Ackman still strong on Fannie and Freddie
A number of Bill Ackman’s holdings have been in the news lately, Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) have brought serious damage to hedge funds who had holdings in the GSEs. In the shareholder letter, the hedge fund said that it is not worried about the dismissal of lawsuit in the federal court. In fact, Bill Ackman was so confident about the future of these mortgage giants, that he was buying more shares while others were unloading,
“We believe the U.S. District Court ruling will ultimately be overturned on appeal, and similar lawsuits in other jurisdictions will yield a more favorable outcome. The adverse court ruling resulted in a large decline in Fannie and Freddie’s respective share prices, which we used as an opportunity to purchase additional shares in both companies. We voluntarily withdrew our case in the U.S. District Court and are devoting our legal resources to reversing the Federal Government’s improper seizure of common shareholders’ property by prosecuting our Constitutional takings claims in the U.S. Court of Federal Claims.”
The letter said that this will be prolonged battle and the stock is likely to stay volatile until a consensus resolution is reached. The fund’s exposure to Fannie and Freddie accounts for just 3% of its asset base, which is small considering that Pershing is known for holding large concentrated stakes in companies. Bill Ackman strongly believes that Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) earnings should be used to build well-capitalized companies. The reformed GSEs will give affordable access to mortgage credit and are also of value to taxpayers through Treasury’s ownership in Fannie and Freddie’s common stock via warrants.
Pershing Square stands to gain billions from Allergan
Bill Ackman discusses profits from the fund’s investment in Allergan, Inc. (NYSE:AGN) in the investor letter. The fund now holds 26.6 million shares of Allergan after selling 2.24 million shares of the company earlier this month. Pershing Square used the proceeds from the sale to transfer $344 million to Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX). Bill Ackman stands to make a 77% profit on this position based on the $227/share Actavis plc (NYSE:ACT) has offered for Allergan, Inc. (NYSE:AGN). Pershing’s remaining stake is worth $5.6 billion, $3.4 billion in cash for AGN shares and 9.81 million shares of Actavis, which are approximate worth $2.6 billion at current price. Pershing said that they are doing due diligenece on Actavis to decide whether they would hold on to its shares once the transaction is closed in April next year.
Zoetis is a scarce asset, says Bill Ackman
Pershing Square’s only new investment in the last quarter was Zoetis Inc (NYSE:ZTS), a maker of animal health products. Zoetis is a co-investment of Sachem Head Capital and Pershing Square and makes up for 10% of the company’s equity.Pershing said that Zoetis has a highly durable business and a dominant role in the market. Since its spin-off from Pfizer Inc. (NYSE:PFE), the company has become the only large and publicly traded animal health company. Zoetis has very little competition in the sector, judging by the fact that majority of its products are sold without patent protection. Pershing called Zoetis a scarce asset, and it appears has plans to look for a buyer for the company to maximize value for shareholders.
This was Pershing Square’s first letter to its shareholders after its IPO on October 1 of this year.
PSCM also welcomed Charles Korn to its investment team in September; he has previously worked at KKR & Co.
I know its a old article. Just ripening the future. Its heading there sooner than later.
Published: August 27, 2014 at 4:08 pm ESTBy: Bill Ashton
The Federal National Mortgage Association (FNMA) is up over 2% during trading today as the company is in search for an attorney to help it get re-listed on the New York Stock Exchange (NYSE). Fannie Mae published a job posting for a corporate attorney, which made investors optimistic over its return prospects. The company was de-listed from the exchange in 2010.
Fannie Mae became a government sponsored enterprise (GSE) due to the $187.5 billion bailout it received from the government following the 2008 housing crisis. Under the initial terms of the bailout, the company was to pay the government a 10% dividend on its income. But in 2012, the rules were changed such that the government bags all profits made by the company.
Although the company has returned more than what it took from the government, it is still under conservatorship of the Federal Housing Finance Agency (FHFA). The agency is looking to dissolve the entity whereas other shareholders are demanding that the government release the company to the open market.
Other shareholders in the company, who have not seen any income come their way, have filed multiple lawsuits against the government. Preferred shareholders seek a revision to the profit-sharing arrangement, while common shareholders like Bill Ackman’s Pershing Square demand damages from lost profits over claims that the government has breached its contract.
Pershing Square is the largest shareholder in Fannie Mae with a 10% stake. The hedge fund has held on to its position, as Fannie Mae was profitable till the third quarter of fiscal year 2013, and is fighting for the company to be freed from government control. In its most recent quarterly results, Fannie Mae generated net income of $3.7 billion, a 33% year-over-year decline. The decline was attributed to the company releasing its tax reserves in 2013, which had boosted income in following quarters.
With the addition of a corporate attorney to its team, Fannie Mae is now looking to rid itself from government control. The company’s stock price has gained over 220% in the last year and its market cap is now above the minimum level required to be listed on the NYSE.
Advance Video Feed Time Starts at 21:55. This is where the Hearing Starts
For purposes of this Form 13F-HR for the third quarter of 2014, the filer is not disclosing its holdings in both Federal Home Loan Mortgage Corp and Federal National Mortgage Association, because such securities are not included on the Official List of Section 13(f) securities released by the Securities and Exchange Commission.
verybody talks about fixing the problem of Fannie Mae and Freddie Mac, but it is hard to make anything actually happen. Current legislative grand plans for housing finance restructuring are complex, full of untried ideas, and seem unlikely to be enacted.
We have a reform bill in the House, the “PATH Act,” which would transition U.S. housing finance to one based on private markets. In my opinion, it ought to be enacted, but everybody agrees that it won’t be. I call this Plan A.
We now have a Senate bill, “Johnson-Crapo,” which is getting a lot of attention. It is bipartisan, which means it gives every constituency in the real estate political complex something. Let us call it Plan B. It has a lot very debatable about it, both on the merits and from the viewpoint of the majority in the House.
Suppose that neither Plan A nor Plan B can get enacted. What then?
Do we want to live indefinitely with the Fannie and Freddie status quo? No. Nobody is supporting an indefinite continuation of Fannie and Freddie in conservatorship, run as a ward of the state, with no capital, enjoying even more subsidies and market share than ever before. That would indeed be a bad idea.
Therefore, we need a Plan C—one which is simple and direct.
The Plan C I propose for immediate action, until fundamental housing finance reform can be achieved someday, is easy to understand. It is in essence:
Treat Fannie and Freddie exactly like a Too Big To Fail (TBTF) bank. We already know what this means. It would include recognizing them as the Systemically Important Financial Institutions (SIFIs) they indubitably are.
Are Fannie and Freddie Too Big To Fail? Nothing could be more obvious.
Are Fannie and Freddie systemically important? Nothing could be more obvious.
Thus what we need is a simple, clear, a-partisan act to immediately reduce the distortions, systemic risk, capital arbitrage, taxpayer exposure and utter dependence on the government, of Fannie and Freddie. We have already worked out with great efforts over the past several years how to address TBTF banks: Just apply this to Fannie and Freddie!
Specifically, Plan C has seven steps:
Give Fannie and Freddie the same leverage capital requirement as every TBTF bank holding company, namely, minimum equity capital of 5 percent of total assets.
Formally designate Fannie and Freddie as SIFIs, just like every TBTF bank. Fannie has assets of $3.3 trillion, bigger than JPMorgan and Bank of America. Freddie has $2 trillion in assets, bigger than Citigroup and Wells Fargo. Both are running with close to infinite leverage. It is undeniable that they are in fact SIFIs.
Make Fannie and Freddie explicitly pay for their proven guaranty from the government, just like TBTF banks have to pay deposit insurance premiums assessed on their total liabilities. Fannie and Freddie should likewise pay an “offset fee,” also assessed on their total liabilities– all of which are guaranteed by the government. I propose this offset fee to the Treasury be set at 0.17% per year. Consider that Fannie and Freddie with essentially zero capital are critically undercapitalized. The base FDIC assessment fee of the government’s deposit insurance guaranty for an undercapitalized bank is 0.23 percent to 0.35 percent. The total premiums paid by all banks to the FDIC were about 0.17 percent in 2012 and 0.16 percent in 2013 of estimated insured deposits. This fee proposal is certainly moderate.
Apply all consumer protection rules in full force to Fannie and Freddie, just like to every TBTF bank. Fannie and Freddie now have a free pass to avoid regulations intended to protect mortgage borrowers–that is ridiculous.
Remove all special treatment of Fannie and Freddie from all banking regulations. The limits on credit exposure to one borrower, the risk-based capital requirements on such exposure, and in every other respect, Fannie and Freddie should be treated in banking regulations exactly as any other TBTF bank.
Eliminate Fannie and Freddie’s exemption from state and local income taxes. Treat them in this respect, too, just like every other TBTF bank.
Finally, when steps 1-6 are in place, we can settle the issue of how to treat the bailout senior preferred stock of Fannie and Freddie. I propose that its dividend should be set in statute at its original 10 percent per year, it being understood that paying dividends of course does not reduce the principal of preferred stock. Fannie and Freddie must first pay their offset fee, then the dividends on the taxpayers’ senior preferred, then build up their capital until it reaches 5 percent of total assets. After that, all excess cash must go to retiring the remaining principal of the senior preferred stock at par until it is fully paid. There must be no dividends on the old junior preferred stock or common stock until the capital requirement is met and the taxpayers’ forced investment is completely retired at par.
After all that is done, the old junior preferred and common stock could again receive dividends out of profits Fannie and Freddie might make while competing on a level basis with all other TBTF banks.
We should immediately preempt the danger the pernicious status quo by implementing Plan C. Then continue working on Plans A and B.
Unleash the coverup.. The $9 Billion Dollar Question. More to come.. The list will keep grow longer. So much corruption and coverups..
What is a conservatorship?
A conservatorship is the legal process in which a person or entity is appointed to establish control and oversight of a Company to put it in a sound and solvent condition. In a conservatorship, the powers of the Company’s directors, officers, and shareholders are transferred to the designated Conservator.
What is a Conservator?
A Conservator is the person or entity appointed to oversee the affairs of a Company for the purpose of bringing the Company back to financial health.
In this instance, the Federal Housing Finance Agency ("FHFA") has been appointed by its Director to be the Conservator of the Company in accordance with the Federal Housing Finance Regulatory Reform Act of 2008 (Public Law 110-289) and the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501, et seq., as amended) to keep the Company in a safe and solvent financial condition.
How is a Conservator appointed?
By statute, the FHFA is appointed Conservator by its Director after the Director determines, in his discretion, that the Company is in need of reorganization or rehabilitation of its affairs.
What are the goals of this conservatorship?
The purpose of appointing the Conservator is to preserve and conserve the Company’s assets and property and to put the Company in a sound and solvent condition. The goals of the conservatorship are to help restore confidence in the Company, enhance its capacity to fulfill its mission, and mitigate the systemic risk that has contributed directly to the instability in the current market.
There is no reason for concern regarding the ongoing operations of the Company. The Company’s operation will not be impaired and business will continue without interruption.
When will the conservatorship period end?
Upon the Director’s determination that the Conservator’s plan to restore the Company to a safe and solvent condition has been completed successfully, the Director will issue an order terminating the conservatorship. At present, there is no exact time frame that can be given as to when this conservatorship may end.
What are the powers of the Conservator?
The FHFA, as Conservator, may take all actions necessary and appropriate to (1) put the Company in a sound and solvent condition and (2) carry on the Company’s business and preserve and conserve the assets and property of the Company.
What happens upon appointment of a Conservator?
Once an "Order Appointing a Conservator" is signed by the Director of FHFA, the Conservator immediately succeeds to the (1) rights, titles, powers, and privileges of the Company, and any stockholder, officer, or director of such the Company with respect to the Company and its assets, and (2) title to all books, records and assets of the Company held by any other custodian or third-party. The Conservator is then charged with the duty to operate the Company.
What does the Conservator do during a conservatorship?
The Conservator controls and directs the operations of the Company. The Conservator may (1) take over the assets of and operate the Company with all the powers of the shareholders, the directors, and the officers of the Company and conduct all business of the Company; (2) collect all obligations and money due to the Company; (3) perform all functions of the Company which are consistent with the Conservator’s appointment; (4) preserve and conserve the assets and property of the Company; and (5) contract for assistance in fulfilling any function, activity, action or duty of the Conservator.
How will the Company run during the conservatorship?
The Company will continue to run as usual during the conservatorship. The Conservator will delegate authorities to the Company’s management to move forward with the business operations. The Conservator encourages all Company employees to continue to perform their job functions without interruption.
Will the Company continue to pays its obligations during the conservatorship?
Yes, the Company’s obligations will be paid in the normal course of business during the Conservatorship. The Treasury Department, through a secured lending credit facility and a Senior Preferred Stock Purchase Agreement, has significantly enhanced the ability of the Company to meet its obligations. The Conservator does not anticipate that there will be any disruption in the Company’s pattern of payments or ongoing business operations.
What happens to the Company’s stock during the conservatorship?
During the conservatorship, the Company’s stock will continue to trade. However, by statute, the powers of the stockholders are suspended until the conservatorship is terminated. Stockholders will continue to retain all rights in the stock’s financial worth; as such worth is determined by the market.
Is the Company able to buy and sell investments and complete financial transactions during the conservatorship?
Yes, the Company’s operations continue subject to the oversight of the Conservator.
What happens if the Company is liquidated?
Under a conservatorship, the Company is not liquidated.
Can the Conservator determine to liquidate the Company?
The Conservator cannot make a determination to liquidate the Company, although, short of that, the Conservator has the authority to run the company in whatever way will best achieve the Conservator’s goals (discussed above). However, assuming a statutory ground exists and the Director of FHFA determines that the financial condition of the company requires it, the Director does have the discretion to place any regulated entity, including the Company, into receivership. Receivership is a statutory process for the liquidation of a regulated entity. There are no plans to liquidate the Company.
Can the Company be dissolved?
Although the company can be liquidated as explained above, by statute the charter of the Company must be transferred to a new entity and can only be dissolved by an Act of Congress.
Corinne Russell (202) 649-3032 / Stefanie Johnson (202) 649-3030
Timothy J. Mayopoulos, president and chief executive officer. “We continue to build a strong book of business based on appropriate standards. We are committed to being our customers’ most valued business partner and delivering the products, services, and tools our customers need to serve the entire market confidently, efficiently, and profitably.”
Fannie Mae reported net income of $3.9 billion and comprehensive income of $4.0 billion for the third quarter of 2014.
Fannie Mae expects to pay $4.0 billion in dividends to Treasury in December 2014. With the December dividend payment, Fannie Mae will have paid a total of $134.5 billion in dividends to Treasury in comparison to $116.1 billion in draw requests since 2008. Dividend payments do not reduce prior Treasury draws.
Fannie Mae has provided more than $4.3 trillion in liquidity to the mortgage market since 2009, including approximately $123 billion in liquidity in the third quarter of 2014, enabling families to buy, refinance, or rent homes.
Fannie Mae has helped distressed families retain their homes or avoid foreclosure through more than 1.6 million workout solutions since 2009, including approximately 39,000 in the third quarter of 2014.
WASHINGTON, DC — Fannie Mae (FNMA/OTC) reported net income of $3.9 billion for the third quarter of 2014 and comprehensive income of $4.0 billion. The company reported a positive net worth of $6.4 billion as of September 30, 2014 resulting in a dividend obligation to Treasury of $4.0 billion, which the company expects to pay in December 2014.
Fannie Mae’s net income of $3.9 billion and comprehensive income of $4.0 billion for the third quarter of 2014 compares to net income of $3.7 billion and comprehensive income of $3.7 billion for the second quarter of 2014. Net income in the third quarter of 2014 increased compared with the second quarter of 2014 due primarily to lower fair value losses and an increase in revenues. This increase was partially offset by a decline in credit-related income.
Fannie Mae recognized a provision for federal income taxes of $1.8 billion for the third quarter of 2014, which resulted in an effective tax rate of 31.4 percent.
“This was another solid quarter, with the company reporting strong financial results and continuing to provide much needed liquidity to the market,” said
CEO, Board Members Named at Common Securitization Solutions, LLC
Fannie Mae and Freddie Mac Sign Agreements to Capitalize and Operate CSS
November 03, 2014
WASHINGTON, DC – Fannie Mae (FNMA/OTC) and Freddie Mac (OTCQB: FMCC) today jointly announced that the first chief executive officer (CEO) has been named for Common Securitization Solutions, LLC (CSS), which was established by the companies to build and operate the Common Securitization Platform (CSP), a new secondary mortgage market infrastructure. Additionally, Fannie Mae and Freddie Mac each appointed two executives to the CSS Board of Managers and signed governance and operating agreements for CSS.
David M. Applegate, who led both GMAC Mortgage and GMAC Bank during a 17-year career at General Motors Acceptance Corporation, has been appointed chief executive officer of CSS. Applegate brings more than 20 years of mortgage and banking experience to his new leadership role at CSS.
Prior to joining CSS, Applegate was president, CEO and director of Homeward Residential, Inc., a Dallas-based mortgage lender and servicer with assets of $4.5 billion and a global workforce of 3,000. Previously, he was president of GMAC Mortgage and chairman of GMAC Bank from 2000-2007. At GMAC Mortgage, Applegate assembled a strong executive team that transformed the company into an industry leader. Applegate also served as president of mortgage insurer Radian Guaranty Inc., and managed a consulting practice with major financial services clients.
Jerry Weiss, Freddie Mac Executive Vice President and Chief Administrative Officer, said, "I am delighted that CSS will have a leader of such stature and quality. David Applegate will help ensure that CSS forms a sound foundation on which to rebuild the infrastructure of the country’s secondary mortgage market and launch a single security. Freddie Mac is pleased to be playing a leading role in this important project."
"CSS is poised to take the next steps in building a future securitization infrastructure," said Andrew Bon Salle, Fannie Mae Executive Vice President, Single-Family Underwriting, Pricing and Capital Markets. "David Applegate is a respected leader in the industry who will bring deep expertise in mortgage finance to CSS. Fannie Mae looks forward to working with CSS, Freddie Mac and the Federal Housing Finance Agency (FHFA) to lay the foundation for a strong housing finance system for the future."
Appointments to the CSS Board of Managers are:
David Lowman, Freddie Mac Executive Vice President, Single-Family Business
David Lowman has served as executive vice president for Freddie Mac's Single-Family Business since May 2013 and is a member of the company's senior operating committee. As head of Freddie Mac's Single-Family Business, Lowman has broad responsibility for the line of business, including managing the company's relationships with its Seller/Servicers, the performance of Freddie Mac's guarantee book of business, securitization of new business, and all sourcing, servicing and business operations. Lowman has worked in the mortgage and consumer finance business for over 30 years, serving at some of the nation's largest mortgage operations.
Jerry Weiss, Freddie Mac Executive Vice President and Chief Administrative Officer
Jerry Weiss has served as executive vice president and chief administrative officer since July 2010 and is a member of Freddie Mac's senior operating committee. Weiss has overall responsibility for managing the Freddie Mac's external and regulatory affairs and serves as the company's senior executive liaison to the FHFA and the U.S. Department of the Treasury. He also manages Freddie Mac's Strategic Initiatives division, overseeing all significant conservatorship and corporate strategic initiatives. Weiss has over 30 years of experience in the financial services industry and joined Freddie Mac in October 2003.
Terry Edwards, Fannie Mae Executive Vice President and Chief Operating Officer
Terry Edwards has served as Fannie Mae's executive vice president and chief operating officer since 2013. He joined Fannie Mae in September 2009 to lead the company's foreclosure prevention and loss mitigation activities for its single-family book of business. Prior to that, Edwards was president and CEO of PHH Corporation, where he served for nearly three decades in a variety of executive roles.
Rick Sorkin, Fannie Mae Senior Vice President, Single-Family Pricing Strategy and Structured Transactions
Rick Sorkin has served as Fannie Mae's senior vice president – single-family pricing strategy and structured transactions since April of 2014. Previously, he was vice president of structured transactions. Sorkin's pricing strategy team sets and implements single-family guaranty pricing terms for whole loan and mortgage-backed securities business. He also is responsible for overseeing the issuance and product development of mortgage-backed structured transactions. Over the past 10 years, his team has issued more than $4 trillion in structured securities. He joined Fannie Mae in 1989.
Common Securitization Solutions, LLC is a jointly owned limited liability company formed between Fannie Mae and Freddie Mac for the purpose of designing, developing, building and operating the CSP. Common Securitization Solutions is equally owned by Fannie Mae and Freddie Mac and represents an important milestone in FHFA’s goal of building a new secondary market infrastructure. The intention of the CSP is to replace certain elements of the Fannie Mae and Freddie Mac proprietary systems for securitizing mortgages and performing associated back-office and administrative functions. The FHFA's 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac includes the goal of developing a single Enterprise mortgage-backed security as part of the efforts to build the CSP.
Published: Nov 1, 2014 7:00 a.m. ET
This will benefit energy sector stocks Canadian Natural Resources CNQ, +2.08% and Peabody Energy BTU, +1.76% ; Boston Scientific BSX, +0.76% in medical devices; (and Fannie Mae FNMA), +3.35% It could be bad for refiners like Valero VLO, +2.54% and Tesoro TSO, +4.86% We’ll get to more winners and losers in a moment.
But first, remember that a Republican Congress vs. a Democratic White House won’t mean total gridlock by default.
Both sides may be open to compromise to get what they want. After all, Republicans want to show accomplishments ahead of the 2016 presidential elections, and the White House probably wants to pump up the economy ahead of those elections.
And even with just a slim majority in the Senate, Republicans can defuse filibusters on budget-related matters by using a legislative tool called “reconciliation,” which limits Senate debate time, points out Lawrence McDonald, the head of U.S. macro strategy at Newedge and author of “A Colossal Failure of Common Sense.”
Housing sector: Republican control of Congress will likely bring a shareholder-friendly overhaul of reform efforts targeting Fannie Mae and Freddie Mac FMCC, +1.98% says McDonald. A Republican Senate victory could put Sen. Richard Shelby, a Republican from Alabama, in charge of the Senate Banking Committee. Shelby is a strong supporter Fannie and Freddie, so this would help their shareholders, says McDonald. Congress may also pare back the Federal Housing Finance Agency’s role in mortgage insurance, which would help mortgage insurers like Radian RDN, +3.44% and MGIC M, -0.14% says McDonald.