FHFA Predicted $72,000,000,000 Profit 26 Days After Brazen Soviet Style Profit Grab by TimHoward717
In light of the news regarding the newly leaked secret treasury documents, I want to share a nice little gem. It’s a report produced on October 26,2012 entitled “FHFA Updates Projections of Potential Draws for Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC).” I have attached a PDF file below. Keep in mind the Third Amendment Sweep was signed in August of 2012 to be effective September 30,2012. On page 8 they state,”Furthermore, over the projection period the Enterprises pay additional dividends of $78 billion in Scenario 1 to $32 billion in Scenario 3.” The projection period was from June 2012 to December 2015. Less than a month after the governments Soviet-style profit grab took effect, the government acknowledges that even under the worst case scenario Fannie Mae and Freddie Mac would turn a 32 billion dollar profit by December 2015. The mid-range scenario based on Moody’s “Current Baseline” house price paths produce a whopping 72 billion-dollar profit.
5 Charlie Munger Quotes Every Investor Should Know
Charlie Munger is perhaps best-known as the vice chairman of Berkshire Hathaway, where he has been Warren Buffett's longtime business partner. As well as holding this position, he also servers as the chairman of the Daily Journal Corporation and is a director of Costco Wholesale Corporation. Munger started his investment career in the 1960s when, Read More
Once again we let the government tell you all you need to know in their own words. With discovery in full swing and reams of documents exchanging hands as we speak, we have only seen the tip of the iceberg. Keep the Faith!
FHFA’s updated projections of Fannie Mae, Freddie Mac financial performance, October 26, 2012
The Federal Housing Finance Agency (FHFA) today released updated projections of the financial performance of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), including potential draws under the Senior Preferred Stock Purchase Agreements (PSPAs) with the U.S. Department of the Treasury. These updated projections show cumulative Treasury draws that are reduced and more stable compared to previous projections. The key drivers of those results include an overall reduction in actual and projected credit-related expenses and changes in the dividend structure contained in the PSPAs, which eliminates the need to borrow from Treasury to pay dividends.
FHFA first released financial projections in October 2010, and has provided updates of those projections on an annual basis. Through the FHFA Conservator’s Report, FHFA reports actual performance versus projections on a quarterly basis.
Projected Treasury Draws and Dividends
To date, Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) have drawn $187.5 billion from Treasury under the terms of the PSPAs. Under the three scenarios used in the projections, cumulative Treasury draws (including draws required to pay dividends) at the end of 2015 range from $191 billion to $209 billion. If dividend payments were subtracted from the projected cumulative draws, the net combined amounts for both Enterprises would range from $67 billion to $138 billion. In the previous projections released in October 2011, cumulative Treasury draws (including draws required to pay dividends) at the end of 2014 ranged from $220 billion to $311 billion.
For the selected scenarios, in the current projections, an additional $3 to $22 billion would be required to support the Enterprises over the projection period. Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) would not require additional Treasury draws after 2012 in any of the three scenarios. Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) would not require additional Treasury draws after 2012 in two of the three scenarios. Furthermore, over the projection period the Enterprises pay additional dividends of $78 billion in Scenario 1 to $32 billion in Scenario 3.
Fannie Mae, Freddie Mac: October 2012 Projections versus October 2011 Projections
The projection period for the current projections and the previous projections runs three and a half years. The current projection period runs through the end of 2015. The prior projection period ran through the end of 2014. The difference in the range of ending cumulative Treasury draws between the October 2012 projections and the October 2011 projections can be attributed to three primary factors:
- Actual financial results for the first year of the projection period in the October 2011 projections (the second half of 2011 and the first half of 2012) were substantially better than projected.
- Updated projections of financial results for the remaining two and a half years of the projection period in the October 2011 projections (the second half of 2012; 2013 and 2014) are substantially better than in previous projections.
- Changes to the PSPAs, effective January 1, 2013, which replace a fixed 10 percent dividend on senior preferred stock with a sweep of net worth, effectively ends the contribution of dividends to projected Treasury draws.