Earnings Forecast Buzz for Fannie Mae, Apple, Yahoo, Alibaba, Gilead Sciences …

PHOENIX, Jan. 29, 2015 /PRNewswire/ -- EarningForecast.com has issued earnings forecast research with special focus on financial performance of the following stocks: Fannie Mae

FNMA, +0.00%

Apple

AAPL, +3.11%

Yahoo!

YHOO, -5.88%

Alibaba

BABA, -8.78%

Gilead Sciences

GILD, +1.69%

and Bank of America

BAC, +1.51%

.

(Read the full report by clicking the link below, you may need to copy and paste the full link to your browser.)

Report Highlights:

Federal National Mortgage Assctn Fnni Me

FNMA, +0.00%

: The shares of Fannie Mae

FNMA, +0.00%

began the trading session with a price of US$2.14. When day-trade ended, the stock price soared 6.07% to US$2.27 by the end of last trading session with 15.43 million shares exchanged hands, compared to daily average volume of 5.55 million. Fairholme is suing the government, arguing it unfairly changed the rules after it took control of both government sponsored enterprises during the 2008 financial crisis so that the government received all of the profits and left none for private shareholders. More than 20 lawsuits in all have been filed against the government by various Fannie and Freddie shareholders, including giant hedge funds such as Perry Capital and Pershing Square Capital Management. Judge Margaret Sweeney of the U.S. Court of Federal Claims said Wednesday she would deny a government request for a postponement that attempting to delay a widely followed lawsuit brought by Fairholme Capital Management. The industry of Mortgage Investment slid about 0.02%, and its competitor Federal Home Loan Mortgage Corp. earned about 1.90% to the price of US$2.15. Do you think Fannie Mae will go on? Do you think now is a good time to buy the stock? Investors can check the FNMA earnings forecast report here.

Read the Full Report:http://www.earningforecast.com/PR/012915A/FNMA/FannieMae.pdf

Apple Inc.

AAPL, +3.11%

: The shares of Apple

AAPL, +3.11%

began the trading session with a price of US$117.62. When day-trade ended, the stock price jumped 5.65% to US$115.31 by the end of last trading session with 146.44 million shares exchanged hands, compared to daily average volume of 53.13 million. After posting excellent first-quarter revenue and phone shipment numbers, Apple CEO Tim Cook faces a balancing act of maintaining the company's premier place in the consumer segment, while expanding its efforts in the enterprise market. The Chinese market will also pose some specific challenges for Apple. Even though the company increased shipments there by 70% in the first quarter, challenges from companies like Xioami may eventually force Apple to change its go-to-market strategy down the road. The industry of Electronic Equipment rallied about 4.51%, and its competitor BlackBerry fell about 4.17% to the price of US$10.12. Do you think Apple will go on? Do you think now is a good time to buy the stock? Investors can check the AAPL earnings forecast report here.

Read the Full Report:http://www.earningforecast.com/PR/012915A/AAPL/Apple.pdf

Yahoo! Inc.

YHOO, -5.88%

: The shares of Yahoo!

YHOO, -5.88%

began the trading session with a price of US$49.80. When day-trade ended, the stock price declined 3.19% to US$46.46 by the end of last trading session with 84.84 million shares exchanged hands, compared to daily average volume of 15.79 million. Yahoo! announced its plans for a tax-free spin-off of the company's remaining holdings of Alibaba, about 384 million shares in US$40 billion value, into a newly formed independent registered investment company called SpinCo. Yahoo! reported earnings of 30 cents per share for the fourth quarter, beating analysts' expectations of 29 cents per share. The company posted revenue of US$1.18 billion for the period, lower compared to the US$1.19 billion consensus estimate. The industry of Internet Information Providers dropped about 1.00%, and its competitor Google lost about 1.66% to the price of US$510.00. Do you think Yahoo will go on? Do you think now is a good time to buy the stock? Investors can check the YHOO earnings forecast report here.

Read the Full Report:http://www.earningforecast.com/PR/012915A/YHOO/Yahoo.pdf

Today EarningForecast.com also observed abnormal trade volume for the following companies; Check out the consensus earnings forecast reports below:

Alibaba Group Holding Ltd.

BABA, -8.78%

:

Read the Full Report:http://www.earningforecast.com/PR/012915A/BABA/Alibaba.pdf

Gilead Sciences, Inc.

GILD, +1.69%

:

Read the Full Report:http://www.earningforecast.com/PR/012915A/GILD/GileadSciences.pdf

Bank of America Corp.

BAC, +1.51%

:

Read the Full Report:http://www.earningforecast.com/PR/012915A/BAC/BankofAmerica.pdf

About EarningForecast.com:

EarningForecast.com focuses on tracking and monitoring company Earnings Data for top market movers in the U.S. stocks market. EarningForecast.com features a team of experienced data analysts striving to provide the investment community with the tools, software, and data necessary to carry out more effective investment research.

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Bove Declares Stalemate On Fannie Mae, Freddie Mac

Bove is right not to expect Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) reform this year, but the end of conservatorship that he supports still isn’t on the table

It wasn’t that long ago that Rafferty Capital Markets VP Richard Bove declared victory in the push to get Fannie Mae and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) recapitalized and re-privatized, citing a massive change in FHFA policy. But after this week’s testimony by FHFA director Mel Watt in front of the House Committee on Financial Resources, Bove seems much less optimistic.

“My sense is that nothing will be done by Congress on the status of the GSEs for a year. The press is not interested in the issues. The public does not care because it sees no change. Stalemate!” he writes.

Housing Trust Fund is the biggest source of disagreement between Watt, House Republicans

Bove homes in on the three biggest disputes between Watt and Republican representatives regarding the GSEs. They opposed his decision to invest in the Housing Trust Fund, and argue that he doesn’t have the authority to restart payments under HERA (though HERA has been interpreted by the courts as giving FHFA an extremely wide berth); they argue that the new 3% down payment programs will lead to higher loan losses (and Bove agrees); finally Watt was pushed to explain how he believes guarantee fees should be set – whether they should ideally balance risk perfectly or be used to turn a profit.

Bove interprets that last bit as a debate about whether high g-fees might let private mortgage backers into the market and shrink the GSEs, but it was clear from context that the g-fee discussion was a different angle of attack on the Housing Trust Fund. If g-fees are too high, then the trust fund is being financed by borrowers, if they’re too low then it’s being financed by taxpayers.

Fannie Mae deadlock is over what comes next

“The Democrats are clearly making decisions that would lead to the continuation of the existence of the GSEs. The Republicans understand this and are fighting the willingness of the FHFA to take actions that that extend the life of the GSEs,” writes Bove.

But Watt has continually asked Congress to enact GSE reform (not just at this week’s hearing) and has refused to offer guidance about what he thinks that reform should look like. He also claimed during the hearing that he is an independent regulator and is not a part of the Obama administration.

Regardless the option that Bove and other Fannie Mae longs most want to hear discussed, the possibility of reviving Fannie Mae and Freddie Mac and ending the conservatorship, wasn’t on the agenda. There does seem to be a serious stalemate on GSE reform, but the question is what will come next, not whether we’ll go back to the old system.

Fannie Mae, Freddie MacFannie Mae, Freddie Mac

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Fannie Mae: The Audacity Of Growth (FNMA)

In a recent paper, Fannie Mae’s Trapped Profits Come into View, we demonstrated that Fannie Mae common shares (OTCQB:FNMA) would be worth $7.11 if the net worth sweep were reversed. The valuation models in that paper extrapolated recent quarterly earnings figures, which include one-time legal settlements, securities gains, and credit related income, to arrive at an estimate for future earnings. In this paper, we will improve the accuracy of the earnings estimate by using the guaranty portfolios to model revenues and expenses. This will allow us to paint a more detailed picture of how Fannie’s earnings will evolve in the future, and this in turn will allow for a more robust valuation assuming the third amendment were reversed. [Please refer to the important disclosure information at the end of this report.]

In order to understand Fannie’s future earnings power, we first need to construct an estimate of normal earnings in one year. In the third quarter of 2014, Fannie Mae charged an average fee of 41.2 bps to guarantee Single-family mortgages. This average, however, includes fees related to the Temporary Payroll Tax Cut Continuation Act of 2011 (TCCA). If we exclude TCCA income, which is offset with an identical expense that is associated with mortgages originated between April 1, 2012 and January 1, 2022, the average guaranty fee was around 36 bps. We estimate that the average guarantee fee will be around 39 bps next year if Fannie continues to charge its current rate of 53.5 bps for new Single-family guarantees and the average mortgage life is seven years. In Q3 2014, Fannie Mae charged an average Single-family guaranty fee of 63.5 bps, which includes an impact of a 10 bps increase from TCCA charges. From this point forward, references to Single-family guaranty fees will exclude TCCA fees.

Next, Fannie estimates that the credit expense on its current Single-family portfolio is 4 bps and that operating expenses for the Single-family segment are running at 7 bps when measured against the guaranty portfolio. This gives a pretax operating margin of 28 bps, and since the GSEs only pay federal income tax, Fannie’s Single-family segment will have a net income margin of 18.2 bps, or approximately $5.3 billion on $2.9 trillion, next year. We estimate the Multifamily segment makes $600 million a year by going through a similar analysis.

Fannie Mae’s Capital Markets Group (CMG) segment currently has a mortgage portfolio of $438 billion. Fannie is required under the senior preferred stock purchase agreement to reduce its CMG mortgage portfolio by 15% a year until it reaches $250 billion. Hence, the portfolio will be about $372 billion in a year. In Q3 2014, the CMG (also known as Fixed Income Arbitrage) had net interest margins of approximately 1.75%. We estimate that the CMG also earns 10 bps in fees annually for engaging in structured transactions and other lending services and that operating expenses are 13 bps of the CMG portfolio. Thus, we estimate the CMG segment will make about 111.8 bps after-tax on its portfolio next year or approximately $4.5 billion [(($438+$372)/2)*.01118].

Based on these figures, our estimate for the current one-year earnings run rate is $10.4 billion. This earnings estimate is after-tax; note, however, that Fannie Mae has $42.8 billion of deferred tax assets on its balance sheet. Thus, the Company will not have to pay taxes on its next $122 billion in earnings. Given this, Fannie’s current one-year earnings run rate excluding taxes is $16.0 billion, we estimate.

In our estimate for run-rate earnings, the average Single-family guaranty fee is only 39 bps. This average, however, will rise over time as new mortgages are charged the higher fee rate. It is also likely that new guaranty fees will continue to rise above the current rate of 53.5 bps (favorable bank risk weightings are given to GSE MBSs and considering the GSEs scale, infrastructure, personnel, regulatory, and reputational advantages.). If the average Single-family guaranty fee were increased to 60 bps, Single-family net earnings would be 31.9 bps [(60-4-7)*.65]. Multiplying 31.9 bps by the $2.9 trillion gives Single-family net earnings of $9.3 billion. Raising the Single-family guaranty fee to 80 bps increases Single-family net earnings to 44.9 bps or $13.0 billion on the current book of business. Solely by the act of raising the average guaranty fee by 20 to 40 bps, Fannie increases its earnings by $4 billion to $7.7 billion based on its current book of business and run-rate earnings would equal $14.4 billion to $18.1 billion.

The impact from higher guaranty fees increases with time due to growth in the Single-family guaranty portfolio. U.S. 1-4 family mortgage debt outstanding grew at annual rate of 9.2% from 1952 to 2014.1 A reasonable estimate for future U.S. 1-4 family mortgage debt growth is the increase in average home prices plus population growth. From 1964 to 2014, the average sales price of houses sold in the U.S. increased by 5.8% annually and from 1952 to 2014, the U.S. population grew 1.1% annually.2,3 A more conservative estimate is inflation plus population growth. From 1947 to 2014, inflation as measured by the GDP price deflator grew 3.2% annually.4 Thus, we get estimates of 4.3% to 6.9% for growth in total U.S. 1-4 family mortgage debt outstanding. 6.9% may seem unrealistic; however, nominal GDP growth averaged 6.6% from 1947 to 2014 providing adequate financing for 6%+ mortgage debt growth.5 To be conservative, however, we will use a maximum of 4.3% annual growth in the following valuations.

We also believe it is very likely that Fannie will continue to see reversals in its allowance for loan losses. Most of Fannie’s current provisions are related to individually impaired loans that were made during the bubble years of 2005-2008. It is typical for losses to peak about five to seven years after origination. Hence, we believe it is likely that provisions will come down significantly in the next several years. From 1990 to 2007, Fannie Mae averaged 3 bps in credit losses per year on its Single-family guaranty. If we assume the average mortgage life is seven years, the reserve should be roughly 21 bps of its portfolio. The current reserve is 1.29% of the Single-family guaranty portfolio. Reducing it to 50 bps over the next five years, increases earnings by cumulative total of $20 billion. This figure has been added to our analysis and increases the per share value by $0.50 to $1.00.

Using the input estimates from above, we consider two possible scenarios given a reversal of the third amendment to value FNMA shares. In the first scenario, the excess dividend payments made to Treasury are returned to Fannie Mae and added to the common equity account. In this scenario, Fannie must build regulatory capital before repaying the senior preferred stock principal. In the second scenario, the excess dividend payments are treated as a return of principal and Fannie Mae is allowed to repay senior preferred principal before building regulatory capital. The second scenario is much more favorable to common shareholders because the Company does not have to pay senior preferred dividends while trying to build capital. This greatly reduces the number of years junior stakeholders have to wait until they receive distributions. There is unquestionably much uncertainty about the ultimate deal that will be struck between the Treasury and junior stakeholders if the third amendment is reversed. Nevertheless, we believe there is a very strong possibility that the GSEs will be able to refinance the senior preferred stock because the senior preferred stock certificates have a mandatory pay down of the liquidation preference upon issuance of new capital stock.6,7 Moreover, we believe that the U.S. Government does not wish to continue to hold ownership stakes in private finance companies and will look to either sell the senior preferred shares or allow them to be refinanced.

In the first scenario, we estimate that it will take 24 years to first build capital and then repay the senior preferred stock if the Single-family guaranty portfolio grows by 4.3% annually, Single-family guaranty fees are 60 bps on new mortgages, and capital levels are 2.5% (this may seem small, but remember the GSEs’ pre-crisis minimum capital requirement was only 0.45%!). In 25 years, the Single-family portfolio will be $8.2 trillion and earnings will be $26.0 billion (~$8.2 trillion times 31.9 bps). We assume the Multifamily guaranty portfolio also grows by 4.3% annually. This is conservative when compared to historical U.S. multifamily mortgage debt growth of 8.1% annually from 1952 to 2014.8 The Multifamily portfolio is $570 billion in 25 years and earnings are $1.7 billion. CMG earnings should decline over the next three to five years as the Fixed Income Arbitrage portfolio is wound down. We assume that the portfolio declines to around $250 billion and then stays at 8.5%, which is approximately $250 billion divided by $3 trillion, of both guaranty portfolios. Thus, the CMG will make about 9.5 bps [((175+10-13)*.65)*.085] on both portfolios and earnings will be $8.2 billion in 25 years.

After building capital and paying off the senior preferred principal, Fannie will also have to pay about $1.6 billion in junior preferred dividends and make about $9.0 billion in regulatory capital investments. Therefore, cash flows to common equity holders will approximate $25.3 billion in 25 years. We believe 6.7% is an appropriate discount as this implies a P/E multiple of 15x, which is still lower than the current equity market multiple. The present value of cash flows under the first scenario with Single-family portfolio growth of 4.3% annually, Single-family guarantee fees of 60 bps, and capital levels of 2.5% discounted at 6.7% is $155.7 billion or $27.02 per share. If we increase Single-family guaranty fees to 80 bps, it takes 19 years to build capital and payoff senior preferred stock and the common shares are worth $44.79. Even if we raise the required capital level to 5% in the previous two valuations, the common shares are still worth $11.01 and $25.44.

If we are more conservative with growth by assuming the Single-family portfolio only increases by 3% annually, which is close to the assumption used in our previous analysis, Fannie Mae’s Trapped Profits Come into View, it takes 25 years to build capital and pay off senior preferred stock and the common shares are worth $16.93 with Single-family guaranty fees of 60 bps and 2.5% capital levels. If we raise the Single-family guaranty fee to 80 bps, it takes 20 years to pay off senior preferred shares and the common shares are worth $28.88. In summary, we believe FNMA shares are worth $27.02 in the first scenario or 12 times the current price range of $2.30 to $2.40.

In the second scenario when Fannie is allowed to first pay down the senior preferred principal, it takes fewer years to both pay off senior preferred shares and build capital. Now, it only takes 13 years to pay off the senior preferred shares and build capital with Single-family portfolio growth of 4.3% annually, 60 bps Single-family guaranty fees, and 2.5% capital levels. Here, the common shares are worth $37.48. If we raise Single-family guaranty fees to 80 bps, the common shares are worth $56.22 after waiting only 11 years before receiving distributions. Increasing capital to 5% causes the shares to fall to $18.16 and $34.76 in the previous two valuations as it now takes 23 and 18 years before distributions are paid to junior stakeholders. For scenario two, we again believe the most appropriate assumptions are at least 4.3% annual Single-family portfolio growth, 60 bps Single-family guarantee fees, and 2.5% capital or $37.48 per share.

From the above calculations, it is apparent that Fannie Mae’s common shares will have significant value once the third amendment is reversed. In our previous paper, the crude estimate of Fannie Mae’s earnings gave inaccurate future earnings and in our opinion was overly pessimistic based on historical data. By modelling the earnings using the guaranty portfolios, we can see that under conservative future U.S. housing market growth scenarios Fannie Mae’s common shares are worth $27 to $37 or 12 to 16 times the current price depending on the eventual deal struck between Treasury and junior stakeholders.

A copy of the Fairlight spreadsheet valuation model is available upon request.

Disclaimer: Use of this material is at your own risk. As of the publication date of this article (the “Report”), Fairlight Capital LLC (“Fairlight”) and its affiliates (collectively, the “Authors”) hold long positions tied to the securities of Federal National Mortgage Association (the “Company”) for their own accounts and the accounts of clients and stand to benefit from an increase in the price of the common stock of the Company. Following the publication of the Report, the Authors intend to continue transacting in the Company’s securities and may in the future be long, short, or neutral with respect to their investment and outlook on the Company. As such, no continuing recommendation is being made that the analysis contained in the Report is still supported by the Authors as of any date following the date the Report is initially published. Likewise, investment recommendations contained in the Report are not designed to be applicable to the specific circumstances of any particular reader, and you should consult with your own advisers to determine if the recommendations contained in the Report are right for you. The Authors have obtained all information herein from sources believed to be accurate and reliable. However, such information is presented “as is,” without warranty of any kind, whether express or implied. The Authors make no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results to be obtained from its use.

This Report contains certain forward-looking statements and projections. These projections are included for illustrative purposes only. By their nature, forward-looking statements and projections are inherently predictive, speculative, and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements and projections. No assurances can be given that the forward-looking statements in this document will be realized. The Authors do not intend to update these forward-looking statements.

All expressions of opinion are subject to change without notice, and the Authors do not intend to update or supplement the Report or any of the information contained herein.

1. Board of Governors of the Federal Reserve System (US), Mortgage Debt Outstanding by Type of Property: One- to Four-Family Residences.

2. US. Bureau of the Census, Average Sales Price of Houses Sold for the United States.

3. US. Bureau of the Census, Total Population: All Ages including Armed Forces Overseas.

4. US. Bureau of Economic Analysis, Gross Domestic Product: Implicit Price Deflator.

5. US. Bureau of Economic Analysis, Gross Domestic Product.

6. Epstein, R. (Sept. 10, 2014) What Happens if the Government Loses on the Third Amendment? The Senior Preferred Stock Certificates Spell Nothing But Trouble For the Government. Forbes.

7. Fannie Mae Preferred Stock Certificate, Section 4. Mandatory Pay Down of Liquidation Preference Upon Issuance of Capital Stock.

8. Board of Governors of the Federal Reserve System (US), Mortgage Debt Outstanding by Type of Property: Multifamily Residences.

Editor’s Note: This article discusses one or more securities that do not trade on a major exchange. Please be aware of the risks associated with these stocks.

Disclosure: The author is long FNMA. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. (More…)

Freddie Mac Supported Industry With More Than $28 Billion in 2014 Multifamily Volume

MCLEAN, VA–(Marketwired – Jan 28, 2015) –  Freddie Mac (OTCQB: FMCC) announced today that it had another strong year with $28.3 billion in loan purchase and bond guarantee volume for its multifamily business in 2014, up 10 percent from $25.9 billion the previous year. This was the second largest year of multifamily purchases in the company’s history.

New business volume reflects $25.8 billion of our $25.9 billion purchase cap for 2014 established by Freddie Mac’s conservator, the Federal Housing Finance Agency (FHFA). In addition, new business volume not subject to the FHFA purchase cap totaled $2.5 billion and included certain affordable housing loans, loans for smaller multifamily properties, and loans for manufactured housing communities.

Quotes from David Brickman, executive vice president of Freddie Mac Multifamily:

  • “We used 99.9 percent of our $25.9 billion volume cap for 2014 mortgage purchases by expanding our market presence and improving our market position as a leading multifamily debt capital provider in the U.S.”
  • “We are on a roll and growing by serving more markets including manufactured housing communities and smaller apartment communities. Our financing also increased for class BC properties, as well as for those in secondary and tertiary markets due to rising demand for rental housing throughout the U.S.”
  • “We expect to have another year of double digit percent growth in our new business volume given that our volume cap for 2015 has been increased by 16 percent to $30 billion and we expect to increase our activity in uncapped products, particularly small property loans.”

Freddie Mac Multifamily 2014 Business Highlights:

  • Generated nearly $1.2 billion in total comprehensive income through the first three quarters. (Fourth quarter 2014 earnings data has not yet been released).
  • Executed 21 Multifamily securities offerings in 2014 for a total transactions volume of $22.4 billion which, in addition to K-Deals, included a small volume of other securities, including the company’s Q- and M-Deals.
  • Issued $21.3 billion in K-Deals in 2014 and securitized almost $93 billion in multifamily loans since the program started in 2009, backing approximately $79 billion in guaranteed certificates and almost $14 billion in unguaranteed certificates.
  • Settled roughly $2.7 billion in targeted affordable housing business of which approximately $1.4 billion were multifamily bond credit enhancements and Tax-Exempt Bond Securitizations (TEBS).
  • Purchased just over $1.2 billion in seniors housing mortgages.
  • Transacted close to $1.3 billion in student housing loans.
  • Continued to provide a consistent source of liquidity to support affordable rental housing nationwide. Approximately 90 percent of the apartment units Freddie Mac finances are affordable to households earning up to the area median income, and most of those loans are securitized.
  • Provided financing for nearly 1,800 properties amounting to almost 427,000 apartment units, of which the majority are affordable to families earning low or moderate incomes.
  • Provided additional liquidity to more underserved markets by launching new initiatives to provide financing for Small Balance Loans and Manufactured Housing Community loans.
  • Reported a low delinquency rate of 4 basis points as of December 31, 2014, reflecting our continued strong portfolio performance.

Click here to read the 2013 business volume press release.

Since the launch of Freddie Mac’s multifamily business in 1993, it has provided more than $344 billion in financing for about 63,000 multifamily properties.

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four home borrowers and is one of the largest sources of financing for multifamily housing. Additional information is available at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.

Sweeney Delivers Another Victory for Fannie Mae, Freddie Mac Investors

Sweeney Delivers Another Victory for Fannie Mae, Freddie Mac Investors by Todd Sullivan, ValuePlays

Now, kudos for the WSJ for at least giving this decision some generic lip service coverage (as opposed to previously ignoring of them) but one has to notice it void of the colorful adjectives used to describe any “crushing” or “catastrophic” defeat shareholders see. Further, one must also notice when plaintiffs lose a courtroom battle their stances are described by the WSJ as “far-fetched” , “flawed” , “junk economics and dubious legal reasoning” but here, just a simple “set-back” for the government. But, why quibble, babysteps, at least they covered this victory.

From the WSJ:

The government suffered a set-back Wednesday in its attempts to fend off lawsuits brought by a group of Wall Street investors over the treatment of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) .

A judge in the U.S. Court of Federal Claims denied the government’s motion to stay proceedings in that court, according to two people familiar with the decision. Lawyers for the government had asked the Court of Claims to put the lawsuits on hold pending the appeal of a decision by a judge in the U.S. District Court for the District of Columbia that dismissed a similar group of cases last September. Shares of Fannie Mae jumped by more than 8% Wednesday morning. Shares of Freddie Mac rose by more than 4%.

Wednesday’s decision means the plaintiffs, who include Fairholme Funds, will be able to continue to collect information from the government in hopes of bolstering their argument that the Court of Claims has jurisdiction over the cases.

The cases were brought by investors claiming to be wronged by the government’s sweep of nearly all of the profits of Fannie Mae and Freddie Mac. The plaintiffs argue that the profit sweep is an illegal “taking” under the U.S. Constitution. The Court of Claims hears cases against government.

Sweeney has said on more than one occasion plaintiffs will have their day in court and in regards to HERA and FHFA:

I know you’re going to say that the Court has no ability to have any — to, in any way, impact FHFA, and I disagree with that. I don’t believe that is a blanket insulation.

The government continues to suffer defeat after defeat in its efforts to deny plaintiffs their day in court before Sweeney. Predictably, they have lost and she has denied them at every turn. Her next order ought to be approving Alvarez and Marsal (hired by Fairholme) to the list of those able to see documents covered by the protective order.

Fannie Mae, Freddie MacFannie Mae, Freddie Mac

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Freddie Mac Prices First STACR Credit Risk Sharing Transaction of 2015

MCLEAN, VA–(Marketwired – Jan 28, 2015) – Freddie Mac (OTCQB: FMCC) today priced its first Structured Agency Credit Risk (STACR(R)) transaction of the year, a $880 million offering of STACR debt notes, Series 2015-DN1. This transaction is the first one in which the company sold a portion of the first loss risk. When STACR DN1 settles, Freddie Mac will have laid off a portion of its credit risk on more than one million loans since the program began in 2013.

Pricing for the STACR Series 2015-DN1, M-1 class was one-month LIBOR plus a spread of 125 basis points. Pricing for the M-2 class was one month LIBOR plus a spread of 240 basis points. Pricing for the M-3 class was one month LIBOR plus a spread of 415 basis points. Pricing for the B class was one month LIBOR plus a spread of 1150 basis points. The offering is scheduled to settle on or around February 3, 2015.

“This is a great start to the year,” said Mike Reynolds, Freddie Mac vice president of Credit Risk Transfer. “This is the first time we sold a share of the first loss through STACR and we think it’s a step forward in the development of the credit risk transfer market. The benchmark 2015-DN1 transaction had very strong demand with several new domestic and foreign investors.”

J.P. Morgan and Citigroup served as co-lead managers and joint bookrunners for STACR Series 2015-DN1, which has a reference pool of recently-originated Single-Family mortgages with an unpaid principal balance of more than $27.6 billion. STACR 2015 DN1 Class M-1, Class M-2 and Class M-3 Notes will be listed on the Global Exchange Market of the Irish Stock Exchange.

Freddie Mac holds the senior loss risk in the capital structure, and a portion of the risk in the Class M-1, M-2, M-3 and the first loss Class B tranche. The M-1and M-2 bonds are rated by Moody’s and DBRS. The M3 bonds are rated by Moody’s.

Freddie Mac has led the market in introducing new risk-sharing initiatives with 10 STACR debt note offerings and seven ACIS(SM) (Agency Credit Insurance Structure) transactions since 2013. Through STACR and ACIS, Freddie Mac has laid off a substantial portion of credit risk on more than $233 billion of UPB in Single-Family mortgages, representing more than one million loans.

This announcement is not an offer to sell any Freddie Mac securities. Offers for any given security are made only through applicable offering circulars and related supplements, which incorporate Freddie Mac’s Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission (SEC) on February 27, 2014; all other reports Freddie Mac filed with the SEC pursuant to Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) since December 31, 2013, excluding any information “furnished” to the SEC on Form 8-K; and all documents that Freddie Mac files with the SEC pursuant to Sections 13(a), 13(c) or 14 of the Exchange Act, excluding any information “furnished” to the SEC on Form 8-K.

Freddie Mac’s press releases sometimes contain forward-looking statements. A description of factors that could cause actual results to differ materially from the expectations expressed in these and other forward-looking statements can be found in the company’s Annual Report on Form 10-K for the year ended December 31, 2013, and its reports on Form 10-Q and Form 8-K, filed with the SEC and available on the Investor Relations page of the company’s Web site at www.FreddieMac.com/investors and the SEC’s Web site at www.sec.gov.

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four home borrowers and is one of the largest sources of financing for multifamily housing. Additional information is available at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.

Freddie Mac prices first 2015 STACR risk-sharing deal

Freddie Mac announced the pricing of its first Structured Agency Credit Risk transaction of 2015, which marked the first time that investors were offered the opportunity to purchase the first-loss position in a risk-sharing deal.

According to Freddie Mac, STACR 2015 DN-1 priced as follows:

The M-1 class priced at one-month LIBOR plus a spread of 125 basis points.

Pricing for the M-2 class was one month LIBOR plus a spread of 240 basis points.

Pricing for the M-3 class was one month LIBOR plus a spread of 415 basis points.

Pricing for the B class was one month LIBOR plus a spread of 1150 basis points.

Freddie Mac also reported that the STACR deal was upsized from the initial estimate. When Freddie announced STACR 2015 DN-1, the government-sponsored enterprise said that the offering was for $775 million.

Now that the offering has priced, Freddie said that the offering increased to $880 million.

J.P. Morgan and Citigroup served as co-lead managers and joint bookrunners for STACR Series 2015-DN1, which Freddie said has a reference pool of recently originated single-family mortgages with an unpaid principal balance of more than $27.6 billion. STACR 2015 DN1 Class M-1, Class M-2 and Class M-3 Notes will be listed on the Global Exchange Market of the Irish Stock Exchange.

When Freddie announced the new STACR offering, it also said that the STACR program 2015 features “program enhancements such as transferring a portion of the first loss STACR credit risk tranche to the private capital markets,” adding that the enhancements reduce credit risk and promote program liquidity and provide diverse investment options for investors.

“Freddie Mac is shifting its credit risk business strategy from a buy-and-hold company to a buy-and-sell company, so it is natural that we would further reduce our credit risk exposure by selling the first-loss piece,” Freddie Mac’s vice president of credit risk transfer, Mike Reynolds, said when the new offering was announced. “We have heard from numerous investors who have an appetite for more risk and higher yields like those found in the first loss piece.”

Reynolds said that the deal was indeed well received by investors looking for more risk.

“This is a great start to the year,” Reynolds said upon the pricing of STACR 2015 DN-1. “This is the first time we sold a share of the first loss through STACR and we think it’s a step forward in the development of the credit risk transfer market. The benchmark 2015-DN1 transaction had very strong demand with several new domestic and foreign investors.”

Freddie Mac Forgoes Issuing a Reference Notes(R) Security on Its January 29, 2015 Announcement Date

MCLEAN, VA–(Marketwired – Jan 29, 2015) –   Freddie Mac (OTCQB: FMCC) announced today that it will forgo issuing a Reference Notes® security on its January 29, 2015 announcement date. The company’s 2015 Reference Notes calendar designates dates that it may use to announce the issuance of Reference Notes securities. 

This announcement is not an offer to sell any Freddie Mac securities. Offers for any given security are made only through applicable offering circulars and related supplements, which incorporate Freddie Mac’s Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission (“SEC”) on February 27, 2014; all other reports Freddie Mac filed with the SEC pursuant to Section 13(a) of the Securities Exchange Act of 1934 (‘Exchange Act”) since December 31, 2013, excluding any information “furnished” to the SEC on Form 8-K; and all documents that Freddie Mac files with the SEC pursuant to Sections 13(a), 13(c) or 14 of the Exchange Act, excluding any information “furnished” to the SEC on Form 8-K.

Freddie Mac’s press releases sometimes contain forward-looking statements. A description of factors that could cause actual results to differ materially from the expectations expressed in these and other forward-looking statements can be found in the company’s Annual Report on Form 10-K for the year ended December 31, 2013, and its reports on Form 10-Q and Form 8-K, filed with the SEC and available on the Investor Relations page of the company’s Web site at www.FreddieMac.com/investors and the SEC’s Web site at www.sec.gov.

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four home borrowers and is one of the largest sources of financing for multifamily housing. Additional information is available at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog.

Existing home sales rose in December 2014

Why the Eurozone stimulus drove US Treasuries (Part 4 of 9)

(Continued from Part 3)

What are existing home sales?

Existing home sales are computed and reported monthly by the National Association of Realtors, or NAR. The NAR states that the report focuses on the number and prices of “single-family homes, townhomes, condominiums and co-ops.” Apart from figures for the overall nation, the report provides information for the West, Midwest, South, and Northeast regions of the US.


The December 2014 report

The NAR’s December 2014 report showed that existing home sales increased 2.4% to an annual rate of 5.04 million units. Existing home sales increased from a downward revised 4.92 million pace in November. The pace remained above 5 million sales for six out of the past seven months.

Although pre-owned home sales rose month-over-month, they fell in 2014. The year saw 4.93 million sales. This was down 3.1% from 2013. It showed that there was weak housing activity in the past year.

On the positive side, the median existing-home price in the US was $208,500 for 2014—a 5.8% rise from 2013. This price was the highest since 2007. In 2007, the median existing-home price was $219,000.

Inventory falls

Housing inventory fell 11.1% in December 2014. It fell to 1.85 million pre-owned homes for sale. At the current sales pace, it represents a supply for 4.4 months—down from 5.1 months in November 2014. In the current scenario, a housing supply fall could offset buyer demand. This is due to fewer selection choices and the potential for a quicker price rise.

Rising house prices can be seen in terms of the median price estimate for all types of existing homes. The median price estimate was $209,500 in December 2014. It was up 6% from December 2013.

First-time buyers stay away

First-time home buyers made up only 29% of the total sales in December 2014—down from 31% in November. These buyers averaged 29% of the entire sales in 2014. This was the same as 2013. US builders—like KB Home (KBH), PulteGroup (PHM), and D.R. Horton (DHI)—have more exposure to first-time homebuyers.

Investors who want to gain exposure to the entire homebuilding sector should look at the SP SPDR Homebuilder ETF (XHB) or the iShares Dow Jones US Home Construction Index Fund (ITB).

In the next part of this series, we’ll look at the business cycle indicators. The indicators are computed by The Conference Board.

Continue to Part 5

Browse this series on Market Realist:

And the best Realtors in Rutherford County are…


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The Middle Tennessee Association of REALTORS® (MTAR) held their annual Installation and Awards Ceremony on January 22, 2015 at Stones River Country Club in Murfreesboro. Chosen from among over 1400 REALTOR® members in MTAR’s 8-county area was Janice Carlton as 2014 REALTOR® of the Year and Chuck Shaw as 2014 Rookie of the Year. Based on nominations from their peers and points calculations for their service, these real estate professionals were recognized for their contributions in leadership, commitment and service during the year 2014.

Janice Carlton, MTAR’s 2014 REALTOR® of the Year, is with Coldwell Banker Segroves-Neese Realty in Shelbyville. Janice is the 2015 Chair of MTAR’s RPAC Committee and has been very active with the Association for several years. She was voted the Tennessee Association of REALTORS® 2013 REALTOR® of the Year. Janice served the Bedford County Association of REALTORS® (before their merge with MTAR) as President in 1991. Other nominees for the MTAR REALTOR® of the Year award were Bill Jakes with Exit Realty Bob Lamb Associates in Murfreesboro and Lynn Tede with Bob Parks Realty in Smyrna.

Chuck Shaw, Exit Realty Bob Lamb Associates in Murfreesboro, was voted MTAR’s 2014 Rookie of the Year. Chuck is the 2015 Chair of the Government Affairs Committee. He has been very active with the Association since becoming a REALTOR® in 2012. Also nominated for 2014 Rookie of the Year was: Bethany Arnold, Exit Realty Partners, Manchester; Diane Stockard, Coldwell Banker Snow Wall, Murfreesboro; and Melissa Taylor, Bob Parks Realty, Smyrna.

2015 President Virginia Pappafotis and the Board of Directors were sworn into office by 1980 President Bob Parks. Ms. Pappafotis is the broker for Bob Parks Realty in Smyrna. She has been very active with MTAR and has served the Board of Directors as Treasurer in 2013 and President-Elect in 2014. MTAR’s 2015 Board of Directors are: Dale Patterson, Keller Williams Realty, Murfreesboro – 2016 President-Elect; Richard Lewis, Exit Realty Bob Lamb Associates – 2014 Past President; Scott Abernathy, Reliant Realty, Murfreesboro – Secretary; Chris Garrett, Century 21 United Realty, Murfreesboro – Treasurer; Susan Emory, Crye-Leike Realtors®, Murfreesboro; Bill Jakes, Exit Realty Bob Lamb Associates, Murfreesboro; Sharon Swafford, Swafford’s Property Shop, Winchester; Greg Myers, Red Realty, Smyrna; Rex Brown, Coffee County Realty, Tullahoma; Kay Petty, Bob Parks Realty/Land/Auction; Lynn Tede, Bob Parks Realty, Smyrna; and Gordon Carlisle, Keller Williams Realty, Murfreesboro.

The Middle Tennessee Association of REALTORS® proudly recognized five new REALTOR® Emeritus members. Awarded by the National Association of REALTORS® for achieving 40+ years in the REALTOR® family, new REALTOR® Emeritus members are: Harold Shelton, Action Homes, Smyrna; Barbara Cunningham, Bob Parks Realty, Murfreesboro; Jerrold Pedigo, Jerrold Pedigo Realty, Murfreesboro; Frank Johns, Frank Johns Realty, Smyrna; and Peter Beasley, Gooch-Beasley REALTORS, Monteagle.

MTAR is a not-for-profit trade association serving over 1400 real estate professionals across the Middle Tennessee region. MTAR serves Bedford, Cannon, Coffee, Franklin, Grundy, Marion, Moore and Rutherford Counties in Tennessee. The mission of MTAR is to provide its members with state-of-the-art tools, training and support to ensure that all members have the ability to become ethical, professional and successful REALTORS