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@aerokinetic Maybe you are right. And I'd rather that you are right. We will just have to see. All I know is that Trump from time to time suggests the $FNMA and $FMCC are worth way more than now than before Pulte took over. I think it is definitely happening!

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TIMELINE OF THE RELEASE OF $FNMA and $FMCC

I am seeing a lot of hopium claiming that release is any time now or that it will be in Q4 2026. This is nonsense. I do not expect the release and relist to happen until Q2/Q3 of 2028. Here is why.

As I argued many times over, releasing $FNMA and $FMCC is politically risky. But there is a way to avert any political storm that will follow the release of the twins. Wait very close to the warrant expiration date before releasing. Under this strategy, Trump can always say he has no choice but to release the GSEs because the government warrant is expiring in Sep 7, 2028. Using this strategy, Trump has an added ammunition. He can say that if he doesn't release and exercise the government warrants by the expiration date, the American taxpayers will lose hundreds of billions of dollars of windfall. He can then take an offense attack. He can say that Pocahontas, Leftists etc are denying the American people hundreds of billions of dollars. I expect Pocahontas and Leftists to counter by saying Trump can extend the warrant expiration. It is in here when Trump can cite Fairholme case to argue that arbitrarily extending the warrant expiration could be a breach of good faith covenant and fair dealing. And there is no justification to extend the warrant deadline given that Fannie Mae and Freddie Mac are safe and sound and had consistently passed the stringent stress test.

I think this is Trump admin's strategy in releasing the twins. This explains Trump's "no rush" comment and Bill Ackman's "patience".

I expect movement to start picking up in Q4 2027 or early 2028. I expect a lot of drama in Q2 2028. And I expect the government exercising its warrants by 5PM Sep 7, 2028. I wouldn't be surprised if Trump wants a televised signing ceremony with the plan to complete the signing by 4:59PM Sep 7, 2028. Trump wants showmanship and this will be his greatest show in 2028.

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I think the waiting also makes sense to allow $FMCC to catch up with the required capital requirements (which I think will be reduced from the excessive ERCF requirement). Right now $FNMA is ahead and $FMCC is trailing behind to meet what I believe is going to be the reduced capital requirement. So waiting a few more quarters will allow both GSEs to reach their capital buffers and will therefore allow them to be released simultaneously.

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@grok @_FreddieQuotes_ @pomsrule5 @EG7105253871053 @Catholic_Smores Thank you grok!

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The word 'criteria' might have been used very loosely. When the more proper term is 'precedent'. It created a precedent that future civil litigation can use. What the case did not resolve is the NWS payment that the Treasury already received. If those NWS dividend payments were deemed violative of good faith covenant, then how do we treat those? That's why there is talk that those NWS payment must be recognized as payment towards the principal owed to the Treasury.

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@CaliRefugee1 @revgalerivs @CompoundRich @ScottCov123 @nicosintichakis @Wize_Markets @YoungEagleh7fz Correct. Fairholme did not touch on statutory power of FHFA per HERA. What it did is that it set a judicial precedent for future civil lawsuits if the government acted in a way that is prejudicial and detrimental to shareholders' reasonable expectations.

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@ScottCov123 @CaliRefugee1 @revgalerivs @CompoundRich @nicosintichakis @Wize_Markets @YoungEagleh7fz People need to invest knowing the risks involved. I don't disagree with you that a lot of people are throwing hopium around and this causes other people who are not well informed into investing based on vibes and eventually losing money.

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@ScottCov123 @CaliRefugee1 @revgalerivs @CompoundRich @nicosintichakis @Wize_Markets @YoungEagleh7fz I think some exited when they realized release will happen only in Q3 2028. Who can blame them. There is going to be Anthropic IPO this November.

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@unite172722 @pulte @realDonaldTrump @SecScottBessent @BillAckman @cvpayne @FoxNews @MorningsFBN Here is the link where this post originally came.

https://t.co/4WKAoA73E0

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The jury and the court in Fairholme case focused on shareholders reasonable expectations as of late 2009 when the relevant contractual framework for $FNMA and $FMCC is in effect. The jury found that the shareholders has the following reasonable expectations:

1. A realistic prospect of dividend payments the moment Fannie Mae and Freddie Mac turned profitable.

2. The conservatorship is temporary and that the GSEs are expected to be released.

3. The Treasury dividend pay is fixed at 10%.

While Fairholme cannot compel the government to do anything, it created constraints that the government must meet in any of their actions. In other words, there is a limit to what they can do subject to shareholders' reasonable expectations. This means:

1. The government cannot convert SPS into commons because the SPSPA in effect as of late 2009 does not allow SPS to be converted to common stocks. So all the talk of extreme dilation is now off the table because doing so will violate implied good faith covenant and fair dealing.

2. The government cannot resume dividend pay to them while denying dividend pay to shareholders. If the GSEs are profitable and they can afford to pay dividends, the government cannot arbitrarily act to collect dividends to their SPS while denying dividends to JPS and common stocks. Doing so will violate implied good faith covenant and fair dealing.

3. The government cannot extend warrant expiration arbitrarily because the SPSPA in effect as of late 2009 states that the warrant will expire by 5PM on Sep 7, 2028. Given that Pulte keep on certifying that $FNMA and $FMCC are safe and sound and that the GSEs keep passing the extreme stress tests, extending the warrant expiration will be an arbitrary act. This will violate the implied good faith covenant and fair dealing.

I expect the twin to be released before Sep 7, 2028z I expect significant actions picking up maybe Q4 2027 or even earlier to Q3 2027.

Bottomline, Fairholme is bullish to our cause.

PS: This is not a financial advice. Do your own due diligence.

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@unite172722 @pulte @realDonaldTrump @SecScottBessent @BillAckman @cvpayne @FoxNews @MorningsFBN Next time when you copy and paste my post, you can either retweet my post or put a disclaimer that what you posted is from me.

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This is an incomplete reading of Fairholme. Fairholme established criteria that will be used to judge whether any specific government action on $FNMA and $FMCC is reasonable or arbitrary. Actions that are detrimental to shareholders' reasonable expectations will be deemed a violation of implied good faith covenant and fair dealing.

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Fairholme does not invalidate the SPS and any subsequent amendments done but it does create clear constraints on what the government can and cannot do. The government cannot act in a way that violates shareholders' reasonable expactations, specifically the jury found that:

1. Shareholders reasonably expects realistic prospect of dividen pay once the GSEs are profitable.
2. Shareholders reasonably expects conservatorship to be temporary and will be released. Given the operating SPSPA in 2009, that reasonable expactation is that this conservatorship expires by Sep 7, 2028 (exercising of warrants and endong conservatorship are intrinsically linked).
3. Shareholders reasonably expects Treasury dividend at 10%.

The combined net effect of these three constraints must be satisfied. For example, even if a 10% dividend pay to Treasury is used, but it is calculated against the liquidation preference following Calabria's 2021 Letter Agreement where LP currently stands at at least $350Bn, then 10% of that is $35Bn which exceeds the combined annual net income of the twins. This outcome violates reasonable expectation #1 above (the realistic prospect of dividend pay is frustrated).

What this further means on two critical areas:

1. The government actions must preserve the realistic prospect of dividend pay to shareholders once the GSEs are profitable. Note the qualifying word 'REALISTIC'. Any amendments that is silent on when and how shareholders' dividends will resume denies the shareholders any realistic prospect of dividend pay.

2. While the government indeed has statutory power to extend warrant expiration, it cannot frustrate the shareholders' reasonable expectation that the conservatorship is temporary. Therefore an indefinite extension violates good faith covenant.

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@MurphreeRon @Pm0130454849892 Correct 100%. If we follow the SPSPA in effect as of late 2009, the LP should be around that figure around $180Bn to $190Bn.

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The jury and the court in Fairholme case focused on shareholders reasonable expectations as of late 2009 when the relevant contractual framework for $FNMA and $FMCC is in effect. The jury found that the shareholders has the following reasonable expectations:

1. A realistic prospect of dividend payments the moment Fannie Mae and Freddie Mac turned profitable.

2. The conservatorship is temporary and that the GSEs are expected to be released.

3. The Treasury dividend pay is fixed at 10%.

While Fairholme cannot compel the government to do anything, it created constraints that the government must meet in any of their actions. In other words, there is a limit to what they can do subject to shareholders' reasonable expectations. This means:

1. The government cannot convert SPS into commons because the SPSPA in effect as of late 2009 does not allow SPS to be converted to common stocks. So all the talk of extreme dilation is now off the table because doing so will violate implied good faith covenant and fair dealing.

2. The government cannot resume dividend pay to them while denying dividend pay to shareholders. If the GSEs are profitable and they can afford to pay dividends, the government cannot arbitrarily act to collect dividends to their SPS while denying dividends to JPS and common stocks. Doing so will violate implied good faith covenant and fair dealing.

3. The government cannot extend warrant expiration arbitrarily because the SPSPA in effect as of late 2009 states that the warrant will expire by 5PM on Sep 7, 2028. Given that Pulte keep on certifying that $FNMA and $FMCC are safe and sound and that the GSEs keep passing the extreme stress tests, extending the warrant expiration will be an arbitrary act. This will violate the implied good faith covenant and fair dealing.

I expect the twin to be released before Sep 7, 2028z I expect significant actions picking up maybe Q4 2027 or even earlier to Q3 2027.

Bottomline, Fairholme is bullish to our cause.

PS: This is not a financial advice. Do your own due diligence.

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Correct. The jury in Fairholme focused on shareholders expectations as of late 2009 when the relevant contractual framework for $FNMA and $FMCC is in effect. Since during this time, the SPS is deemed unconvertible to common stock, the government converting them now will violate reasonable expectation and therefore that is a breach of implied good faith covenant and fair dealing.

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@SophiaZhan17547 Any manipulation being done now has limited effect. It pales in comparison to the manipulation done on meme stocks like GME and AMC. The level of manipulation being done now is acceptable. An meme stock level of manipulation is not.

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@ScottCov123 @nicosintichakis @Wize_Markets @YoungEagleh7fz @revgalerivs But why would the government do that?

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The reasonable expectations that the jury found serves as the constraints that the government must satisfy in any of their actions on $FNMA and $FMCC. This is a big deal. Before Fairholme, we all are resigned to the idea that the government can do whatever it wants on the twins at a whim. They can no longer do that. If the government resumes dividend payment to them but denies any dividends to shareholders when the GSEs are profitable and they can afford to do so, that is a breach of good faith covenant. They cannot do that.

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WHY FAIRHOLME CASE IS BIGGER THAN IT SEEMS

I was initially dismissive of the Fairholme case because while it compensates the plaintiffs, I am of the opinion that it does nothing to bring us closer to eventual release.

The most generous reading of the case is that at least it denies the government any incentive to keep $FNMA and $FMCC under conservatorship. But I fear even this reading is on shaky ground because the government can always amend its SPSPA to resume dividend payment. So there is the risk that the government will resume collecting dividend payments indefinitely while shareholders get nothing, ever. Or so I thought.

Can the government resume collecting dividend payment anytime? Yes it can. But it cannot do so in a way that denies shareholders any realistic prospect of future dividends. This is why the NWS breached the implied good faith covenant and fair dealing. The government converted its 10% dividend to perpetual claim on 100% net worth/profit. By doing so, it acted unreasonably because it frustrated shareholders' reasonable expectation.

What is the criteria to use to determine whether the government is acting reasonably? The court and jury in Fairholme case focused on shareholders' reasonable expectations as of late 2009 when the relevant contractual framework was in place. Under this criteria, the jury found that the shareholders reasonably expect a realistic prospect of future dividends once the GSEs returned to profitability. It also found that the shareholders reasonably expect that the Treasury's SPS carries a fixed 10% dividend, not a permanent claim on 100% of all future net worth/profit.

So if the government wants to resume dividend payment, it will have to be cognizant of the shareholders' reasonable expectations. But Calabria's Jan 2021 Letter Agreement (which amended the SPSPA) said that dividend payment to the Treasury can resume only after the GSEs reached their ERCF required capital buffer. That will take more than a decade. So if the government wants to milk the twins now, they will have to amend yet again the SPSPA to allow dividend payment even before the ERCF capital requirement is reached.

Since 100% dividend rate is off the table, and since Fairholme focused on shareholders' reasonable expectations in late 2009 (where SPSPA says dividend is fixed at 10%), then Treasury has no choice but to use 10% rate. But here is what make things interesting. The 10% dividend is always calculated against the liquidation preference (LP). Because of Calabria's Jan 2021 Letter Agreement, Treasury's LP now stands at least $350Bn. Calculating 10% from $350Bn LP yields $35Bn. The average combined net income of the twins is around $28Bn. So even if the twins remitted ALL their net profit to the Treasury, it will not be enough to cover the dividend payment. This is essentially NWS! The new mechanics may be different (it is now using 10% rate as opposed to 100%) but its practical effect is essentially the same as the NWS which was deemed violative of the implied good faith covenant and fair dealing. Why? Because it denies shareholders' reasonable expectation to have a "realistic prospect of future dividend once the GSEs return to profitability."

Note that the increased LP results from Calabria's 2021 Letter Agreement. Because this agreement effectively excludes the shareholders from any dividend payment, it clearly violated shareholders' "reasonable expectation of future dividends once the GSEs return to profitability." Something that Fairholme said the government cannot do. Therefore, I expect the increased LP to be deemed a breach of implied good faith covenant and fair dealing. However the original LP valued at $191Bn still stands since this number results from the SPSPA in effect as of late 2009.

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I think the release and relist will happen instantaneously to avoid any GME or AMC-like stock manipulation. It may happen rapidly and it is over by the time you blinked. Also, I think the stock sale to institutional investors will happen in the background much earlier than the release date which I estimate to be by Sep 7, 2028 before the clock hits 5PM that day.

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I do not think they will convert the $190Bn into commons. The government will get less value overall if they do this. I think, given that the NWS has been found to be a breach of good faith covenant, I would expect the government to recognize the NWS as payment towards the $190Bn LP. Or at least keep the $190Bn as a line of credit with $FNMA and $FMCC paying commitment fee to the government. With Fairholme, I feel confident the government will not act arbitrarily on this $190Bn LP. They can no longer act at a whim. Basically what Fairholme is saying is this: while the government has the statutory power to basically do whatever it wants on the twins, they have to do it in a way that respect the shareholders' reasonable expectations. The jury found the following to be reasonable expectations:

1. That they have a realistic prospect for dividend payment once the GSEs turn profitable.
2. Conservatorship is temporary and is aimed at stabilizing the GSEs therefore it is a reasonable expectation that they be released.
3. The Treasury's dividend pay is fixed at 10%.

Any actions of the government must meet these reasonable expectations.

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Read the Fairholme. The NWS was found breaching good faith covenant because it violated shareholders' reasonable expectation of a realistic prospect of dividend once the GSEs return to profitability. That is the jury's findings. Do your research. Or ask AI if you don't believe me.