Richard X. Bove, Vice President Equity Research at Rafferty Capital Markets, highlights the court decision to allow access to Fannie Mae’s discovery material benefits Fairholme suit.

Judge Margaret Sweeny in the Federal Claims Court in Washington has granted a motion, requested by Fairholme, to make all of the discovery material in its case against the Federal Housing Finance Agency (FHFA) available to the United States District Court of Appeals in Washington D.C. and the United States District Court. This is a big win for Fairholme in this dispute.

It means that what could be over 10,000 documents will be made available to the two D.C. courts. There are two results that could come from this. Judge Royce Lamberth could vacate his earlier ruling against the Fairholme on the basis that he was not provided this information. The Appeals court may decide in Fairholme’s favor on a number of issues given its new access to this material.

Fannie Mae’s status: Discussions between the White House, Treasury Department and FHFA

The discovery information being provided is still under seal meaning that only the applicable judges and lawyers can see it. The next hoped for step is for one of these three courts to unseal the documents so that the public can see what has happened in the historical discussions between the White House, the Treasury Department, and the FHFA concerning Fannie Mae’s status.

I assume that the step that follows this would be a demand by the courts that both parties in this case mediate their differences. It has always been my belief that this mediation will result in a settlement giving shareholders their ownership rights back.

We will see. However, this decision by Judge Sweeny changes the playing field meaningfully in Fairholme’s direction. This case is now alive again in three courts any one of which could find in Fairholme’s and all other shareholder’s favor.

Remember one key shareholder who would benefit if Fairholme wins is the U.S. taxpayer who indirectly owns 79.9% of Fannie Mae’s stock.

Court Allows Fairholme Access To Fannie Mae Discovery Material: Bove