Fannie Mae common stock

[redrumloa]

There's a lively debate on financial forums about what the value of Fannie Mae (FNMA) common stock will be going forward.

http://stockcharts.com/h-sc/ui?s=FNMA&p=D&yr=1&mn=0&dy=0&id=p06159495676

There's been a big run lately in the PPS, but some ugly action today. Partly because of needing a normal pullback and partly because a shill writer for thestreet.com kept writing "article" after "article" slamming the common today. They wanted to create a panic, and they got a panic.

I'm in the stock with a cost average of $0.42. I think the common survives and I think the PPS is going to continue an insane uptrend over the coming days, weeks and months. If you are in the market, I suggest doing some deep due diligence and tell me if you see what I see. I'll give you one nugget.

http://fhfa.gov/webfiles/35/FHFACONSERVQA. pdf

QUESTIONS AND ANSWERS ON CONSERVATORSHIP
Q: What happens to the Company’s stock during the conservatorship?

A: 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.

Q: What happens if the Company is liquidated?
A: Under a conservatorship, the Company is not liquidated.

Q: Can the Conservator determine to liquidate the Company?
A: 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.

Q: Can the Company be dissolved?
A: 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.

The negativity seems to stem from the concept that the common will be wiped out. Conservatorship is NOT receivership, the common will not be wiped out. Fannie Mae is returning to profitability in a big way and will have the ability to pay back the fed much earlier than thought.

If anyone does dig into this, I'd be interested to hear your thoughts. Most finance message boards are useless for meaningful discussion. It is all either pumping or bashing.

 

[robert l. bentham]

http://www.incharge.org/military-money/story/bargain-hunting-for-fannie

"Under the terms of the agreement, common and preferred shareholders bear losses ahead of the new government senior preferred shares," he said.

That means there is no guarantee that current shares of the company will be worth anything when or if Fannie Mae and Freddie Mac come out from under the conservatorship.

"Market discipline is best served when shareholders bear both the risk and the reward of their investment," Lockhart said. "While conservatorship does not eliminate the common stock, it does place common shareholders last in terms of claims on the assets of the enterprise."

If taxpayers end up significantly bailing out the companies, it's not likely there will be any value left for shareholders.

 

[robert l. bentham]

http://www.incharge.org/military-money/story/bargain-hunting-for-fannie

"Under the terms of the agreement, common and preferred shareholders bear losses ahead of the new government senior preferred shares," he said.

That means there is no guarantee that current shares of the company will be worth anything when or if Fannie Mae and Freddie Mac come out from under the conservatorship.

"Market discipline is best served when shareholders bear both the risk and the reward of their investment," Lockhart said. "While conservatorship does not eliminate the common stock, it does place common shareholders last in terms of claims on the assets of the enterprise."

If taxpayers end up significantly bailing out the companies, it's not likely there will be any value left for shareholders.

proceed with caution and as always invest no more than you can afford to lose...

 

[redrumloa]

proceed with caution and as always invest no more than you can afford to lose...

An article from 2008!!!!!

You've got to get with the times A lot has changed since September 2008! Read the NT 10-K that was filed last week.

http://www.sec.gov/Archives/edgar/data/310522/000031052213000055/form12b-25for2012form10xk.htm

PART III—NARRATIVE​

Fannie Mae (formally, the Federal National Mortgage Association) has determined that it is unable to file its Annual Report on Form 10‑K for the year ended December 31, 2012 by the March 18, 2013 filing deadline due to the need for additional time to analyze whether conditions existed as of December 31, 2012 that would require Fannie Mae, under generally accepted accounting principles, to release any portion of the valuation allowance on its deferred tax assets in the fourth quarter of 2012. The release of the valuation allowance would have a material impact on the company’s 2012 financial statements and result in a significant dividend payment to the U.S. Department of the Treasury under the terms of the Variable Liquidation Preference Senior Preferred Stock, Series 2008-2.​

If we conclude the valuation allowance should not be released in the fourth quarter of 2012, we will continue to evaluate the need for the valuation allowance in future periods. The valuation allowance on our deferred tax assets was $64.1 billion as of December 31, 2011 and $61.5 billion as of September 30, 2012. ​

​

Regardless of the decision to release or not release the valuation allowance, we expect to report significant net income for the three months and the year ended December 31, 2012, compared with a net loss of $2.4 billion for the three months ended December 31, 2011 and a net loss of $16.9 billion for the year ended December 31, 2011. ​

Conservativorship is not bankruptcy nor is it receivership. It is estimated that somewhere in the ballpark of $64.1B will be returned to the Fed. Statements have been made at a congressional level that F&F will be allowed to pay down the actual debt and not just make dividend payments to the Treasury. Both F&F have strongly returned to profitability. The bet here on the long side is that our government will have no choice but to release F&F from Conservatorship.

 

[robert l. bentham]

The negativity seems to stem from the concept that the common will be wiped out. Conservatorship is NOT receivership, the common will not be wiped out. Fannie Mae is returning to profitability in a big way and will have the ability to pay back the fed much earlier than thought.

i know it's an older article, i felt you should read it in case you hadn't because you seem to believe that the common can't be wiped out... it can... and it was designed in that manner to begin with

You've got to get with the times A lot has changed since September 2008! Read the NT 10-K that was filed last week.

http://www.sec.gov/Archives/edgar/data/310522/000031052213000055/form12b-25for2012form10xk.htm

i also read that... here's the gist of what it says

"Nothing in this form shall be construed to imply that the Commission has verified any information contained herein."​

which roughly translates too... they might be projecting a rosy economic position to garner investors that can eat our losses when we amend our projections after the fact... in essence..."we don't know"...​

 

[robert l. bentham]

on a personal note however... i believe the stock will at least triple or better in the next two years,if they get out of conservativorship it will be on par with what it once was (it worked well to line their pockets before and without the conservator regulating the amount/type of loans it'll be all wild west like it was before) after that i expect a new shell game to be uncovered and the bottom to fall out... don't be greedy and don't look at it as a long term stock to hold and i think you'll make some "phat bank"...

 

[redrumloa]

after that i expect a new shell game to be uncovered and the bottom to fall out... don't be greedy and don't look at it as a long term stock to hold and i think you'll make some "phat bank"...

I'm not sure what you mean by a new shell game?

Appreciate your input. I like all views that are genuine, pro or con.

 

[robert l. bentham]

I'm not sure what you mean by a new shell game?

thats pretty much what banking is... loan to create false faith, then default and dump the loss... hell i was gonna tell you earlier that a sign for "wild west boom" times was when the congress critters starting asking for deregulation again. and lo' and behold that time is here... deregulation wll get fannie out of the cshp it's what fanni mae needs to be competitive and viable again, as long as the conservator is managing them, they can risk only a small amount of what they could lend to "borrowers who don't fit in the box" were they not restricted... loans are loans, and in a 100% pie chart of their own company i think i read around 40% can be "high risk" (how sane people refer to those loans).but in the overall pie chart of loans they are making in the overall market, it is relatively small, in fact several of the journal trades are attributing some of JP morgans profits (not all by any stretch) to the fact that fannie mae is missing out on these loans. let's make no mistake about we are talking about here. high risk means high risk. the realtors are fidging home inspections and sending them to the bank who is overvaluing them to conform more nicely with the inflated property taxes imposed by your city, county, state. all backed by your dear old uncle reds tax dollars.... you can however use this to your advantage and there are a number of ways. i friggin love real estate so you got me all worked up here... and you talked me into moving... so ive been pestering realtors over a 5 state area for a year now... the opportunities in real property have never been so" seemingly bleak" and yet under the surface it couldn't look any brighter... i love Monopoly... there are several "in's" to this market, not all are as solid as the others... and while bundled home loans backed by uncle sugar might seem a safe bet, you know as well as i the imprudence of betting on the stability of the dollar... it is after all, already "fiat currency"...

 

[robert l. bentham]

http://www.huffingtonpost.com/2013/03/19/wall-street-deregulation-_n_2910168.html

link thingy to show you that ur uncle is working hard to create another false boom... what i'm going to tell you to do, will help you confirm it...

 

[robert l. bentham]

an industry rag...

http://www.gypsumtoday.com/news/archives.pl

here is is one "in"...

http://boards.fool.com/gypsum-shortage-10809087.aspx?sort=postdate

Seems there's quite a shortage and record drywall demand continues to soar. Drywall is a very scarce commodity these days. LAF seems well positioned. They have made a number of acquisitions, increased capacity and have a plant (>1M sq ft) beginning construction in Vancouver in Q2. They also instituted two price increases recently, in Jan and April. In LAF's most recent financials, it's stated that gypsum is the only product line with positive margins.

Their cement business is very strong and recent acquisitions in Mex will enable it to take advantage of TEA-21 (the highway bill) in New Mexico, resulting in increased demand for it's cement, ashphalt, fuels and materials lines.

The question is whether to jump in at these levels (33 3/8). I think that they're on to something and don't want to miss out. Anyone?
.....
here's another companies stock prices and they wont be going down anytime soon... too much reconstruction going on and a good deal of those foreclosure homes need much love as they've been destroyed by the metal scrappers, and as we are approaching tornado, followed by another predicted bad hurricane, season makes this stock a pretty safe bet for at least a year or two of small but comfortable profits...

every time i hobble into home depot the stuff has gone up it seems... you could have doubled your money since last year... and of course the us gov putting the kibosh on drywall imports (love that free market ) tells you north american manufacturers of drywall have a corner on that market... over all tho the suppliers of the materials that make/repair houses say that business s good... this actually does have something to do with your bundled home loans... im getting to that... but these are some of the indicators i use to determine whether real estate is a good investment, and since youre buying into a bundle of loans made to me, you want to move on your investment at the beginning of the upswing to maximize profits... i'm assuming you have at least one friendly realtor? maybe the man or woman who sold you your house. if not pick one and call them. talk to them about their foreclosure homes... some of the realty companies also offer "in house" financing now for "outside the box" borrowers... get an actual loan application from them... does it allow for "creative financing options"? (the answer is yes i've called plenty of them, and when people are offering to give away houses to people with little or no credit, or sell them for a song u can bet on boom times coming (however false the boom may be). and those times are now. i'm not sure who handles this stuff in your community, in mine it is the county appraisers office, but you should call whomever and talk to them about revitalization/renovation grants. i found out about these about 6 or 7 years ago and they are really quite interesting... little known by a good many these funds are targeted towards blighted/ or rural communities... also historical districts... the particular place i used them was in a smaller nw kansas town called atwood... you'd be surprised how eager people in the office are to talk to people who aren't mad... you'll want to confirm that people are A) using them B) and a ballpark estimate of the flow (is it good and heavy?).... when a contractor bids a job, 1/3 is material costs, 2/3 is labor, 20 years ago it was the other way around... that grant money from uncle sam covers 2/3 of the bid... so if your willing to build something for twenty dollars an hour instead of forty, you just got your house redone for free, and you made 20 dollars an hr or (i occassionally use the "free money" to put upgrade materials in that make the home sell quicker)... okay ... so you've talked to the realtor... financing is getting creative and people are using it... county appraiser says there is a steady use of redevelopment monies and people are using them... construction suppliers are projecting (not falsely either) nothing but blue skies ahead... time to make some money... here's the problem with all of this and the things you will need to watch out for, since you want to buy into bundled home loans...

 

[robert l. bentham]

here is another item i came across... it is from last year but when you deal with quarterly projections it gives you a good historical context of future (at least short term) gains/losses to be made... and i will tell you that your investment opportunities in fnma seem more like a strong safe bet to me all the time... so i'm gonna say bullish on fnma for awhile anyway...

http://www.gypsumtoday.com/news/viewnews.pl/id=2093

here are some things you need to remember about these numbers...

"The data reflect contracts but not closings."

all hail mr. yun!!

"Lawrence Yun , NAR chief economist, said buyers are responding to favorable market conditions. "We've had very good housing affordability conditions for quite some time, but we're seeing more impact now from steady job creation, and rising consumer confidence about home buying now that home prices have clearly turned positive."

"Outside of a few spikes during the tax credit period, pending home sales are at the highest level since March 2007 when the index also reached 104.8. On a year-over-year basis, pending home sales have risen for 18 consecutive months."

The PHSI in the Northeast slipped 0.1 percent to 79.2 in October but is 13.3 percent above a year ago. In the Midwest the index jumped 15.6 percent to 104.4 in October and is 20.0 percent above October 2011. Pending home sales in the South rose 5.5 percent to an index of 117.3 in October and are 17.4 percent higher than a year ago. In the West the index declined 1.1 percent in October to 105.7, but is 0.9 percent above October 2011.
The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
# # #
* The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.

the underlined part is the part you need to remember... when these two numbers shuck and and jive together, the market is strong... i can't remember why, forced or unforced (it may have been mandated by government), but the industry installed this check guage so they had places to look along the line for indications of breakdowns. they are invaluable to you as a fnma bundle buyer because they tell you how strong the demand is for the loans you're making... and what the rate of follow thru is... this is important... the check valve is little more than a paperwork change... if you go look at a house and decide its something you want for whatever reason you'll want to haggle... in the old "pre check guage" days... you made an offer then a contract on completion of negotiations, now in order to even make an offer you sign contract to buy first... so what the number/ratio really tells you is a couple of things ... first off it gives you an idea of how many loans are being asked for and eventually made... figure out what % "fnma " available markets are, you know, their target loan market and then you can figure what your projected losses/gains will be a year down the road at the very least (nobody gets foreclosed on in the first year of home buying). deregulaton of any kind will only affect this in your favor so cheer congress on... but more importantly see what percentage of the overall loan pie is made up by the "high risk" lenders... when the ratio of risky outweighs, stable and secure, the market will entropy and convulse once again ...red if this isn't helping you i'll stop...

 

[robert l. bentham]

how to tell when the market is getting risky enough to take your profits and run... i'm going to predict this next boom will be over in 2-3 yrs tops, with total collapse within a 1-2 yrs (requiring a bailout) after that. and i will tell you why i think that... i have no less than ten active relationships with realtors at the moment who are very friendly in the places i have been looking at to move... i recently had to help a friend purchase a house and had about 20 dealings with the various stages of the realty inside operations to see how it is over all functioning and i can say this with all honesty, it is housing bubble burst redux already, all over again... the pressure for congress to weaken dodd frank and relax regulations and restrictions is the clarion call for instability of future coming, what it tells you is that the people who could realistically afford to buy homes is trending downward. so they need to alter what is realistic. good for short term profit taking, and it will be for awhile... then will come a small hiccup. how big a wave it ripples too will be determined by two things, does congress further ease restrictions (you are guaranteed at least one) when the bankers swear thats what it'll take to make a market correction... and the second thing is the spec home market...before i get into the spec home relationship to the end of the boom which is seemingly simple on it's surface, reading it for detail tells you the severity of the individual hiccups and are therefore an excellent warning system for you... when you bail will be testimony to your "cahoney factor".

more on my interactions within the system... about a year ago a friend of mine wanted me to help her find a house for her daughter... the price range was 50 to 70 grand... so we went a looking... its become industry practice that when you go to look at house, the agent brings a copy of the home inspection report... now this is supposedly an outside person connected to no one on either side who gives an objective opinion of the condition of the house. from that report the seller highlights the stuff not broken, and buyer highlights the stuff that is. what happened actually was this. we found a house within the range. we met with the realtor... look at the house... i have a checklist of my own that's 20 pages, that i use to base estimates on home remodels, i can assure you it is more thorough than a home inspectors. but i have no license so what i think about the condition of the house is merely my opinion and doesn't count to anyone but the person who asked. but still, my report may cover more but there should be crossover issues where there are crossover issues. we asked the realtor to refer us a licensed inspector, (i was sure my friend would be looking at a 20 grand hagglng position); and she said she could not. against the law. inspector cant be recommended by the realtor or the seller. she said we could go to whatever finance place and they could refer us to one tho... makes sense... if inspector is gonna be beholden to any man it's the feller with the cash... after all banker doesn't want to lend you more than the house is worth right? (remember they did this same thing last time). if you cant pay for it and hes gotta turn around and resell it and can't get what at least what he lent you, he's in the hole. so we go to a mortgage company that deals in "outside the box" borrowers. shes in her 20's and hasn't the credit yet to buy a house from a regular bank. we talk to the feller and he recommends us a guy he "always uses" who is fair he says, he had not seen my list yet. we agreed to cough up the 150 bucks and the guy went over and looked at the house. we drove around town and eventually ate... bout 5 oclock inspector feller calls us to the house and we give him a check and he hands us a report to take to the bank... i looked at it on the ride over... i couldn't believe what i was looking at. wasn't sure the feller even looked at the same house and reread the address... he allegedly had from his scrawlings... in we go to talk to the banker...

 

[robert l. bentham]

he had to leave for a bit... so we left the inspection report, and a number and i explained to the secretary basically that "his guy" had overlooked quite a bit of things, very serious things... and he should call me when he gets the chance... then we called the realtor and said i was ready to talk to her about the price... (the level of work needed done didn't scare me off and i knew i could have it done in two months at the very outside... she met us at the house and this time i showed her around...she got the bentham "doom and gloom tour" and since i already had a bid prepared for each issue individually, (that she agreed was reasonable), i was counting in reverse from the starting price of 69,500. she was cringing when i pronounced the final number of the value of the house minus the cost of repairs... 32,500. she pointed out that the home inspection made no mention of any of the stuff and any offer made would be reflective of the inspection and not my "opinion". the banker calls while were in the living room. and he's more than a little miffed. it seems the exact words i told his secretary was "to tell him that his buddy fucked him"..."and something about his inspection competence".... he asked me to elaborate... i said he was two blocks away he should come over and id show him.... he reluctantly agreed.... i left the house and went to true value hardware... i needed a piece of string and a better level.... when i got back my friend was walking around with both of them, pointing out the differences in what i saw and the inspector... when she got to the foundation issues, she was informed that the foundation issues were known and in fact repaired. the string line said different... so did the tape measure..

 

[robert l. bentham]

foundation issues are the pot of gold at the end of a buyers rainbow, at least in my world... by this time the realtor lady was asking why i even wanted it with all the work i felt needed done... i told her it didn't frighten me and that none of the problems were outside my sphere of expertise. after showing the banker the foundation issue and how the previous owner had merely hidden the problem, which showed him in great detail, he left in a huff. i had called the inspector on the way to true value and asked him to meet me to make an addendum of some things he "might" have missed. and shortly after bank man left he arrived. he got the "what about this tour"... and each moment was only making him angrier... i asked him to give my friend her check back... he did and he left... now it's just the realtor... and us and all of what just happened...

 

[robert l. bentham]

she produces a contract and tells me to write the amount in the top and then whoever needs to sign it. it was in the right school district so i added 5 grand to the offering price. 39,000. she pulled it from my hand before it could be signed." i can't give him that"she said. "well that's my offer" i replied reminding her of the basement... she then repeated what she said earlier"the offer had to reflect the inspection report"... "mine did not"..." but mine reflected the totality of the reality" i said. she said she was sorry but she couldn't even go to the homeowner with my offer. so we left. three days later a letter comes from salina it was the copy of the home inspection that the bank made, they didn't need it so here ya go...

sadly i would like to tell you that the rest of my experiences were different, but they haven't been... so overvalued homes, are being sold at overvalued property assessments to people who really can't afford to buy a house at it's real value...and everyone in the mechanics of the system is goin along with whatever to make ends... doesn't "sound" like they learned a thing; and visually, from my perspective anyway, it doesn't "look" like it either... it gets worse...

 

[robert l. bentham]

when we were in talking to the banker earlier he told us he saw the house and knew it was gonna need some work, they were gonna allow us around 15 grand extra to cover those costs. the house was appraised at 87 i think or maybe 92, (which put it at a cost exceeding new home construction averages by 60$-75$ a sq ft) that doesn't seem practical, or sustainable. school district location can't be worth all that... so not only are they willing to try and hide stuff, make a shoddy loan for something worth less, they were willing to sweeten the deal with repair money that wouldn't actually even fix the stuff that was mandatory, foundations are kind of a big deal...

 

[robert l. bentham]

which brings me to the place i want to move and my new good buddy Jorge... jorge works for one of those companies that is liquidating foreclosed homes on behalf of the government. what i'm about to explain to you is also not an isolated incident and my conversations with these fellers is pretty much similiar in every regard to another... save exception of the state... colorado, new mexico, missouri, nebraska, kansas, south dakota. i spotted a home on google earth that i really liked, researched it pretty well for a couple days by calling people in the town... starting with the appraiser and some commissioners... checked all the demographics and i'm really liking what i'm seeing happening in the area... they do have a pretty good growth rate and i like the demographics of that particular area so i called the finance company that was holding the house to schedule a walk thru and talk. i ended up talking to jorge for a while on the first call. once i told him i wanted a home that needed a little love he offered me more... by the time he was done... he had 7 other properties plus the one i actually want... at no money down, for a fourth of their appraised value, low interest rate 3 % i need make no payments on any home that isn't rented until 6 months after first rent, and they will add to the loan package a substantial amount of repair money, which i could "draw " from at various stages, to buy materials and pay labor. i just needed to come sign some papers. no credit check.

 

[robert l. bentham]

so here we are... the system is misfiring just as much as it was before... in some cases worse... they are already begging for reduced regulation, congress seems likely to give it to them, and things are moving forward at pretty brisk pace.... all systems are go for profit, and they are go for collapse... which gets us to spec homes... our warning bell...

 

[robert l. bentham]

here's a good article to read... i can refer you to a bunch of papers and stuff explaining this in greater detail but let's suffice it to say, and all agree, one of the most long held indicators of economic stability and consumer confidence is represented by spec home financing.

http://www.naplesnews.com/news/2013/feb/17/building-economy-spec-home-market-collier-property/

of worth to note here is this... spec home growth doesn't have to grow in order for the economy to be healthy... it can stagnate as long as it never drops... each drop will send a ripple through the apparatus and then investors get hit... some will bail unsure if its the final hiccup before the fall, and others will ride the wave and hope for rebound... spec homes make a up a modest amount of homes built anyway, so when interest in them is good and profitable, the cash is flowing and profits are high... a couple percentage point of a drop will result in a huge wave on the other end...so prudence and caution need exercised most here... this is where t all comes down, getting out at the right point is critical, and it's also simple math... about a year and a half into a loan, homeowner starting to notice all the stuff that needs fixed that wasn't on the list, he's encouraged to borrow a little more, to make repairs, and his payments go up... his paycheck doesn't... house keeps falling apart... he's now underwater... he bails but takes advantage of all his legal rights and stays in the home as long as he can... usually another 18 months... the entire time his house is in foreclosure it gets counted differently so you can't look to the quarterly reports for the truth, it is in fiscal limbo... but this is a loss, make no mistakes... they over loaned... bank is underwater too at this time but it's flailing will be explained away by the chains of regulations holding down, which will again make sense to people, in spite of us all the while knowing they prolly can't swim to begin with...

 

[redrumloa]

Wow, interesting stuff!