American Capital Agency Corp. (NASDAQ: AGNC) CEO Gary Kain is not worried about Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) reform legislation, below are comments he made on the company’s conference call yesterday. Also see: Fannie Mae, Freddie Mac Senate Vote Delayed Amid Concerns
Steve DeLaney – JMP Securities – Analyst
Okay. Thanks. And just one final thing just kind of thinking big picture, not too far from your office the Senate banking committee is kicking around Johnson-Crapo on GSE reform.
And one specific question and then just a general open-ended. Would it be your understanding as the way things are drafted that, if this were to proceed — and I know we’re talking about years down the road before it would be in place — but would it be your view that Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) would become full faith in credit bonds? That would be the specific question, and therefore possibly close to Ginnies. And then lastly, is there just anything about this proposal, about this whole concept of GSE reform, that we should be thinking about with respect to the pure agency mortgage REIT model? Thanks.
Gary Kain – American Capital Agency Corp. – President and Chief Investment Officer on Fannie Mae and Freddie Mac
Now look, Stephen, appreciate the question. It’s a good one and timely, as you pointed out. Big picture, we are not worried about the legislation. We don’t see it as drafted, or even most of the other drafts have been out there, as being, let’s say, a threat to our business model.
To your point about the Freddies and Fannies — or the new version of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) being full faith in credit of the government and looking like Ginnies, we agree that that’s the likely outcome. But we think that the pricing of that combined universe will actually be much closer to Freddies and Fannies than it is to Ginnies. Ginnies get the beneficial pricing that they get because there aren’t enough of them to fill that specific Ginnie-only bid, so to speak. But when you combine the three agencies, if the three agencies were all full faith in credit, you’d fill that bid and you’d still be requiring to get the incremental bid from people that are buying Freddies and Fannies today.
Steve DeLaney – JMP Securities – Analyst
Got it.
Gary Kain – American Capital Agency Corp. – President and Chief Investment Officer
So, big picture, we are not really — we don’t see the legislation as something that concerns us. And, again, we remain just very, very comfortable with the agency REIT business model. We think that it really does provide investors with a very liquid alternative that they can’t duplicate in other strategies.
