Fannie Mae secures commitments for credit transfer deal


Fannie Mae (FNMA.PK) said on Friday it secured commitments for a second transaction under which the U.S. mortgage finance agency will transfer some credit risk to reinsurers on $15 billion worth of single-family home loans it plans to buy from lenders.

This type of security is aimed at reducing Fannie Mae’s exposure to defaults, which soared during the housing bust about a decade ago.

Coverage and pricing for the risk transfer deal are committed for 12 months for loans it acquires in the first quarter, Fannie said.

The Washington-based company said it will retain risk for the first 50 basis points of loss on the pool of loans tied to this deal.

If this $75 million “retention layer,” or cushion for loan losses, is exhausted, the participating mortgage insurance companies will cover the next 250 basis points of loss on the pool, up to a maximum coverage of approximately $375 million, it said.

Fannie added that it will continue to offer credit risk transfer deals that cover existing mortgages on its portfolio.

The company’s total book of business was $3.144 trillion at the end of 2016.

Since 2013, it has transferred a portion of its risk on possible defaults on more than $896 billion worth of single-family mortgages.

(Reporting By Richard Leong; Editing by Jonathan Oatis)

Freddie Mac to Pay US $4.5 Billion After Reporting Profit

Freddie Mac will send $4.5 billion to the U.S. Treasury in March as the mortgage-finance giant continues to prepare for the possibility of having zero capital by next year.

The company earned $4.8 billion in the fourth quarter, compared with $2.2 billion in the same period a year earlier, according to a regulatory filing posted Thursday. Net interest income, which includes the fees Freddie charges to guarantee mortgages, was $3.9 billion compared with $3.6 billion, the company said.

The earnings report is the first by the mortgage-finance giant since the ascension of President Donald Trump and newly-confirmed Treasury Secretary Steven Mnuchin, who has said he plans to tackle the overhaul of Freddie and sister-company Fannie Mae, which have been under U.S. control since 2008.

What Trump and Mnuchin decide to do with Fannie and Freddie could have huge ramifications for mortgage lenders, borrowers and private shareholders, who have been fighting for years for a share of the companies’ profits. The earnings report from Freddie along with Fannie’s, which is scheduled to come on Friday, are closely watched indicators of what paths to reform might be open to the Treasury Department.

Stable Market

In that vein, Freddie’s earnings in 2016 were solid but not as spectacular as those posted in some prior years. The company said its earnings benefited from a stable housing market and rising revenue from guarantee fees. Its income was also driven in part by a rise in long-term interest rates in the fourth quarter, which raises the value of derivatives the company holds.

Full-year earnings for last year totaled $7.8 billion, the company said, compared with $6.4 billion in 2015. In 2013, the company made more than $48 billion, after writing up certain tax assets that had contributed to losses during the downturn.

Its core single-family guarantee business had comprehensive income of $2.2 billion and multifamily lending business made $1.6 billion for 2016. The company’s investment portfolio, which the company has greatly reduced since the bailout, made $3.4 billion.

The company’s current operations are largely in line with how it would behave were it controlled by shareholders, Chief Executive Officer Donald Layton said on a call with reporters. Some shareholders have said Fannie and Freddie have been off-loading mortgage credit risk at poor prices to private investors over the past year, but Layton said Freddie would be taking the same approach if the company wasn’t under government control.

Taxpayer Draw

Freddie also shed half its remaining capital. The current terms of the U.S. government’s bailout agreement with Freddie and Fannie allow them to retain a $600 million capital buffer in 2017, down from $1.2 billion last year. The companies will have no capital buffer in 2018, meaning that any losses would require them to take a taxpayer draw. The companies still have a combined $259 billion in funding available from the Treasury if needed.

Freddie over the past year had been buffeted by rising and falling rates that affect the value of derivatives the company used to hedge against interest-rate changes. While accounting rules led the value of the derivatives to change every quarter, the value of the hedged assets didn’t change. That sometimes led to large profits or losses in a given quarter, though Freddie said it expected the effect to even out over time.

In the fourth quarter, market-related gains including the change in rates contributed $2.3 billion to Freddie’s income, the company said.

Hedge Accounting

Going forward, however, Freddie said it would switch to a different accounting method, called hedge accounting, in an attempt to minimize the impact of the mismatch. Hedge accounting allows companies to marry up the changes in values of derivatives and the hedged assets.

That’s similar to the way Freddie and Fannie accounted for their hedges more than a decade ago, until an accounting scandal led the companies to massive earnings restatements and forced out several executives. At the time, the companies’ regulator, and later the Securities and Exchange Commission, said company executives manipulated earnings to collect undeserved bonuses. However various actions and lawsuits over the ensuing years mostly settled for less than the government was asking for or were dismissed as judges ruled there wasn’t an intent to deceive investors.

Layton said in an interview that hedge accounting methods and practices had greatly improved and were now more accurate than they were a decade ago.

“The financial services industry and accounting industry took what was an uncertain field back then and have done a good job on it, so this is a well-trod path,” Layton said.

A spokeswoman for the Federal Housing Finance Agency, which regulates Freddie, said in an e-mail that the agency would monitor the company’s hedge accounting program through normal oversight.

Freddie Mac: Market uncertainty disorients mortgage rates

Continuing its new pattern, the 30-year mortgage rate continues to stray from the Treasury yield amid rising market uncertainty.

This week’s survey once again displays the disconnect between mortgage rates and Treasury yields, a result of continued uncertainty,” Freddie Mac Chief Economist Sean Becketti said.

Click to Enlarge

(Source: Freddie Mac)

The 30-year fixed-rate mortgage increased slightly to 4.16% for the week ending February 23, 2017. This is up from last week’s 4.15% and from last year’s 3.62%.

The 15-year FRM also increased slightly to 3.37%, up from last week’s 3.35% and from last year’s 2.93%.

However, the five-year Treasury-indexed hybrid adjustable-rate mortgage decreased slightly to 3.16%, down from last week’s 3.18% but still up from last year’s 2.79%.

“In a short week following Presidents Day, the 10-year Treasury yield fell about eight basis points,” Becketti said. “However, the 30-year mortgage rate rose one basis point to 4.16%.”

Fannie Mae and Freddie Mac: Let’s Get This Straight

With the recent ruling by D.C. Circuit, there has been a lot of noise, panic and misinformation. This article aims to clear up some of the facts. Given the complexity of the GSE (Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC)) investment thesis, I do not pretend to know everything and welcome discussion.

First, the significance of this appeal is misunderstood. As I understand it, this was an appeal on Judge Lamberth’s original ruling in 2014 which threw out the case. Given there have been no material changes in the evidence presented, there should have been no expectations of a favorable ruling for GSE shareholders. That there was even a strong dissenting opinion should be seen as a bonus.

The language in the filing makes it clear that regardless of what the judges think, they decided to hide behind HERA which stipulates that much of what the Treasury does was beyond judicial review. The plaintiff’s claims specifically challenge FHFA’s actions as counter to their role as a conservator, but the wording between “shall” and “may” was interpreted to mean that FHFA had no obligation to keep the GSEs solvent. In effect, this implies that Perry et al. should have targeted the constitutionality of HERA itself rather than the FHFA’s actions. Ultimately, while FHFA’s actions violates the “spirit” of the rule of law, they are protected by HERA and expecting this appeal to have a positive conclusion is naive especially after we saw Lamberth’s ruling effectively upheld in the case against accounting firms Deloitte Touche.

Meanwhile in Judge Sweeney’s Court of Federal Claims Discovery should be ongoing after she declared the documents that Treasury attempted to claim presidential communication privilege on were improperly withheld. As of Jan 30 2017, based on Fairholme’s alert we are due to see 48 of the 56 documents but given all the roadblocks government has thrown up, I doubt anyone has had the chance to go over them in detail (or at all) and amend their claims. The findings in this Discovery may be the most important aspect of all to the other ongoing lawsuits.

Finally, we have yet to see or hear Mnuchin’s plan for the GSEs aside from some comments on FOX pre-hearing and then even vaguer comments during the Senate hearing. However, there is every reason to believe Mnuchin will vindicate shareholders/plaintiffs here. Aside from his rhetoric we have all heard, he has real connections to Paulson as part of the consortium that purchased Indymac and to Berkowitz via his directorship on Sears’ Board. Another link comes from Brian Brooks, the former general counsel at OneWest now an Executive Vice President at FNMA. From a long-term career standpoint, Mnuchin’s role leading the Treasury Department would last 4 years… would he really want to damage long-term relations with three of the most famous hedge fund managers in U.S.?

Let me finish off with the stock market reaction. At this point in time, where the shares of commons and preferred trade is inconsequential and, in the case of the preferred shares, is only coupled to the potential upside limit. If there was any large seller, it may be Perry Capital as he was in the process of liquidating his Fund in September 2016. Though he kept the GSEs as a core position, it may also be reasonable to expect him to lighten up given the circumstances. For the rest of us, please read the ruling (only 103 pages) and let us wait patiently for evidence from Discovery or Mnuchin’s plan.

Disclosure: I am/we are long GSE PREFERRED SHARES.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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

NAR shows rift between housing availability and affordability …

Existing-home sales are forecast to expand 1.7 percent in 2017, but a new housing affordability model created jointly by the National Association of Realtors and realtor.com, a leading online real estate destination, operated by operated by News Corp subsidiary Move Inc., suggests homebuyers at many income levels could see an inadequate amount of listings on the market within their price range in coming months.

Using data on mortgages, state-level income and listings on realtor.com, the Realtors Affordability Distribution Curve and Score is NAR and realtor.com’s new ongoing monthly research designed to examine affordability conditions at different income percentiles for all active inventory on the market.

The Affordability Distribution Curve examines how many listings are affordable to those in a particular income percentile. The Affordability Score – varying between zero and two –is a calculation that is equal to twice the area below the Affordability Distribution Curve on a graph. A score of one or higher generally suggests a market where homes for sale are more affordable to households in proportion to their income distribution.

Lawrence Yun, NAR chief economist, says a top complaint Realtors have been hearing from clients is a notable imbalance between what they can afford and what is listed for sale. “Home prices have ascended far past wage growth in much of the country in recent years because not enough homeowners are selling and homebuilders have not boosted production enough to meet rising demand,” he said. “NAR and realtor.com’s new affordability measure confirms that buyers aren’t exaggerating about the imbalance. Amidst higher home prices and now mortgage rates, households with lower incomes have been able to afford less of all homes on the market last year and so far in 2017.”

Reflecting a growing shortage of accessible inventory for most income groups, the entire Affordability Distribution Curve in January was below the equality line and the gap was generally wider at lower incomes, which indicates even tighter supply conditions. A household in the 35th percentile could afford 28 percent of all listings, a median income household (50th percentile) could afford 46 percent of listings and a household in the 75th percentile was able to afford 74 percent of active listings.

“Consistently strong job gains and a growing share of millennials entering their prime buying years is laying the foundation for robust buyer demand in 2017,” said Jonathan Smoke, chief economist at realtor.com, a leading online real estate destination. “However, buyers with a lower maximum affordable price are seeing heavy competition for the fewer listings they can afford. At a time of higher borrowing costs, this situation could affect affordability even more as buyers battle for a smaller pool of homes and bid prices upward.”

Calculating last month’s Affordability Score – two times the area under the Affordability Distribution Curve – further highlights the disjointed rate of accessible supply on the market across the U.S. Swift price growth and higher mortgage rates caused January’s Affordability Score (0.92) to shrink nationally from a year ago (0.97) and also in many states. Only 19 states had a score above one (conditions that are more favorable) and a meager three – North Dakota, Alaska and Wyoming – saw year-over-year gains in their score.

“Heading into the beginning of the spring buying season, available supply is more reachable for aspiring buyers in the upper end of the market and specifically in nearly all Midwestern states,” said Smoke. “Meanwhile, many states in the West and South have seen deteriorating supply levels over the past year. Buyers in these areas should know that it may take longer to find the right home at a price they can afford.”

The states last month with the highest Affordability Score were Indiana (1.23), Ohio (1.22), Iowa (1.18), Kansas (1.17), and Michigan and Missouri (both at 1.14). The states with the lowest Affordability Score were Hawaii (0.52), California (0.60), District of Columbia (0.65), and Montana and Oregon (both at 0.67).

“This shortfall of inventory at a time of healthy job gains in most states is one of the biggest reasons for the depressed share of first-time buyers and the inability for the homeownership rate to rise above its near-record low,” added Yun. “The only prescription to reversing this adverse situation is to build more entry-level and mid-market housing that aligns with current household incomes.”

The new Realtors Affordability Distribution Curve and Score was created to be a valuable resource for Realtors and consumers to assess the affordability of markets in different income groups.

Chicago Association Of Realtors Cuts The Ribbon On Its New Offices

The Chicago Association of Realtors started 2017 in new offices inside the Realtor building at 430 North Michigan Ave. CAR held a ribbon-cutting yesterday to christen the new offices and CEO Ginger Downs (who was also celebrating her birthday) gave Bisnow a tour of the 15k SF space.

Chicago Association of Realtors CEO Ginger Downs

Downs (shown in her corner office) said CAR’s lease at 200 South Michigan expired this month and she knew new offices were necessary to address the growing needs of the organization’s members. CAR started the site selection process two years ago and toured 29 buildings before whittling the choices to three finalists. The Realtor building won out because of its location and the synergistic possibilities of being in the same building as the National Association of Realtors. CAR took over the former space of the CCIM Institute, which moved one floor below.

The Classrooms

A look inside one of the classrooms inside the Chicago Association of Realtors' new offices.

Downs said the lead designer, Gensler, separated the new offices into three distinct sections to accommodate the needs of CAR members, staff and students attending Realtors real estate school. Between 8,000 and 10,000 students take courses in the offices annually and three new classrooms will address growing numbers in the future. The classrooms have writable walls and soundproof baffles for separation and take full advantage of daylight, something Downs said was lacking at CAR’s former offices.

The classroom section also feature private testing rooms monitored by CCTV, to observe if any students are cheating on their tests.

The Staff Offices

The staff offices inside the Chicago Association of Realtors' new offices.

The staff offices have a more traditional design with an emphasis on wellness. Every desk is sit-stand so CAR employees can move during the day, while senior staffers have their own glass-enclosed offices. Huddle rooms capable of fitting up to six employees were built to facilitate private and work-related conversations away from the main offices.

The Membership Area

The membership area inside the Chicago Association of Realtors' new offices at 430 North Michigan Avenue.

Downs said CAR’s new membership section was designed with comfort and networking of the organization’s dues-paying members in mind. The area features a conference room that can be separated from the lounge area. This section also has smaller huddle rooms and private telephone booths for members to do work while they are visiting the office.

Now that the new facility is being broken in, Downs said she can focus on planning the National Association of Realtors convention in Chicago this November. This will be the first time since 2001 that NAR has held its convention here, and Downs wants to show members that Chicago is a vibrant real estate market. The NAR convention is the last major undertaking for Downs before she retires next year.

Good housing news for Brevard

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Good housing report from Space Coast Association of Realtors
WAYNE T. PRICE/FLORIDA TODAY

The Brevard County real estate market didn’t tap the brakes in January. It showed some acceleration instead.

Sales of single-family homes on the Space Coast rose nearly 3 percent over the year, while the median sale price — the point at which half the homes sell for less, half for more — jumped to $195,000, up more than 18 percent from a year earlier.

“We’re on a positive trend,” said Julia Dreyer, broker/owner of the Indian Harbour Beach-based Dreyer Associates Real Estate Group. “I don’t think it’s a screaming, rocket trend, which is not what anybody wants. Really, 18 percent, year over year, is a good number. It’s a sustainable number.”

“I don’t think we want to see it go a tremendous amount higher than that or we do start approaching scary bubble area,” she added. “But we are not in a bubble by any means.”

The local data comes as the National Association of Realtors on Wednesday noted that U.S. existing-home sales surged to a 10-year high in January, a sign that buyers may be exhibiting more confidence in the economy and aren’t worried so much about the possibility of higher mortgage rates.

The National Association of Realtors said existing-home sales jumped 3.3 percent to a seasonally adjusted annual rate of 5.69 million units last month. That was the highest level since February 2007.

“Much of the country saw robust sales activity last month, as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home,” National Association of Realtors chief economist Lawrence Yun said in a statement. “Market challenges remain, but the housing market is off to a prosperous start, as home buyers staved off inventory levels that are far from adequate and deteriorating affordability conditions.”

The median existing-home price for all housing types in January was $228,900, up 7.1 percent from January 2016’s $213,700. January’s price increase was the fastest since last January and marks the 59th consecutive month of year-over-year gains.

Locally, details from the report from the Space Coast Association of Realtors show:

Contact Price at 321-242-3658 or wprice@floridatoday.com. You can also follow him on Twitter @Fla2dayBiz.

Fannie Mae launches new rehab supplemental loan


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Multifamily property owners can now take advantage of gains in their multifamily properties, thanks to Fannie Mae’s launch of its new Moderate Rehabilitation Supplemental Loan.

Borrowers can now better observe gains in the value of their properties through Fannie Mae’s Mod Rehab team up with the new Supplemental Loan.

“Our new Mod Rehab Supplemental Loan is a great example of providing value through collaboration with our Delegated Underwriting and Servicing lenders, because together we’re always looking for better ways to serve the needs of multifamily borrowers,” said Hilary Provinse, senior vice president for multifamily customer engagement at Fannie Mae. “Enhancing our Mod Rehab execution with the new supplemental loan is a win for borrowers wanting to secure additional funding on their terms – with certainty of execution, speed, and the flexibility of our single-asset security – and a win for our DUS Lenders because these loans are delegated.”

The new Mod Rehab Supplemental Loan provides borrowers with access to equity when they have an existing Mod Rehab loan. Multifamily properties that have completed its renovation within 36 months of first lien origination amounting to at least $10,000 per unit will have its value increase – a gain borrowers can take advantage of. Borrowers can also qualify for a standard Supplemental Loan aside from the Mod Rehab Supplemental Loan.


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Fannie Mae exec on shortlist to replace Cordray

Fannie And Freddie: Untouchable – Fannie Mae (OTCMKTS:FNMA …

Per Seeking Alpha’s very timely breaking news reporting, late yesterday morning, we learned that a D.C. Circuit court rejected most of Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) shareholders’ claims. As Housingwire’s Ben Lane put it:

In a 2-1 ruling, the D.C. Court of Appeals ruled that Fannie and Freddie shareholders, including the hedge funds that bet on Fannie and Freddie being released from conservatorship, cannot not pursue many of their claims against the government.

This was a major legal setbacks for the Masters of the Universe at Perry Capital, Fairholme Capital, and Pershing Square. Unfortunately, and I tried to warn some of the bullish SA investors, re-privitization of the Government Sponsored Entities (GSEs) was always the “third rail of politics”.

Here the links to my three bearish GSE articles:

  1. What If Steve Mnuchin Isn’t Confirmed By The Senate (January 10, 2017)
  2. Is Steve Mnuchin The John Tower Of 2017 (January 18, 2017)
  3. Looks Like I Am Eating Crow As Steve Mnuchin Appears Likely To Be Confirmed (February 8, 2017)

For younger readers, unfamiliar with the term “third rail”, enclosed below please find the Wikipedia definition and context.

Per the WSJ coverage: Court Ruling Gives Fannie Mae, Freddie Mac Investors Limited Room For Claims – we learned the following key point – that claims depend on whether investors bought the shares before or after 2008 (see below). In other words, if hedge funds bought up the most of the inventory of GSE preferreds, post crisis, at say $0.05 to $0.10 on the dollar, the government isn’t going to write them a check for par because profits started to recover many years later and only after the extraordinary accommodative government initiatives including quantitative easing, zero interest rates, and the suspension of mark to market financial accounting.

The U.S. Court of Appeals for the District of Columbia Circuit on Tuesday affirmed much of the trial judge’s ruling, saying many of the investor claims couldn’t proceed. But the appeals court revived some of the shareholders’ claims for monetary damages, on issues related to liquidation preferences and dividend rights.

The D.C. Circuit sent the case back for further trial court proceedings on those issues, and it said such claims might depend on whether investors bought the shares before or after the 2008 bailouts of the companies.

Per Bloomberg’s reporting: Hedge Funds Can’t Sue Over Investments in Fannie and Freddie, we got statements from the Masters of the Universe and their feeble attempts to somehow positively spin this news.

“We obviously disagree with that,” he said. He paraphrased the court’s conclusion as, “You may have been allowed to do it, but if you breached the contracts with the stockholders, you may still have to pay.”

Fairholme Funds attorney Charles Cooper said: “The net-worth sweep repudiated shareholders’ contracts with Fannie and Freddie, and we are pleased that today’s decision shows that shareholders will not be left without a remedy for this breach of contract.”

At this point, it appears that it is nearly midnight and Cinderella needs to get a hail pass. I am not even sure if the ex-Goldmanite, Steve Mnuchin, can successfully win this unwinnable argument. Because, remember, as the Treasury Secretary, he is acting on behalf of the American people as an objective, impartial, and faithful public servant. Therefore, I continue to believe this will remain a third rail of politics issue and the chance of a Tom Bradyesque Super Bowl 51 miracle are remote.

Lessons Learned

With shares of Fannie Mae common closing down nearly 35% on heavy volume, investors might want to reassess their position. Remember, these shares were trading at $1.65 before President Trump’s victory in November, so there could be more downside ahead.

Source: Google Finance

Although I was wrong about Steve Mnuchin getting confirmed by the U.S. Senate, in all three prior pieces, especially the eating crow piece, I tried to spell out for readers just how political rugged the terrain that needed to traversed for investors to capture the pot of gold on the other side of the rainbow. If you take a step back and I sincerely tried to crystallize this point; objectively did anyone really think that the U.S. government was going to rule in favor of scavenger hedge funds and implement sweeping policies that would directly and negatively impact housing and vast majority of Americans?

I read countless articles with grandiose claims that Fannie and Freddie preferreds would trade at par, and that the common shares could hit $50 or $100. I was scratching my head, as you need an incredible imagination to dream up a scenario where President Trump and Steve Mnuchin successfully sell the tale that providing a multiple billion dollar payout fund to hedge funds is somehow in the best interest of the country. I even provided the link to policy paper: Privitizing Fannie and Freddie: Be Careful What You Wish For by Mark Zandi and Jim Parrott. At every turn, I was met with fierce commentary that I had no idea what I was talking about and that the GSEs were home run bets and that I needed to join the party.

So I don’t write to gloat, as I hate seeing retail investors lose money buying hype peddled by hedge funds with an army of high powered lawyers on retainer. Therefore, I decided to share my lessons learned.

Here is the list of possible lessons learned for investors to consider before embarking on their next high stakes and highly risky adventure:

  1. It is really hard to win a legal case against the government. And even harder when you are arguing for extraordinary treatment that would greatly benefit a select group of hedge funds at the expense of the society as a whole. The vast majority of people benefit from the 30YR mortgage and supportive housing policies.
  2. Notwithstanding the high drama and steady whispers of conspiracy theory, Fannie and Freddie were insolvent in 2008. Therefore, given the perfect storm that swirled with housing prices collapsing upwards of 30%, on a nationwide basis, the government’s $188 billion injection of capital, guarantee, and credit line to the Treasury came at a steep cost. Somehow investors conflated play by play elements in the recent discovery phase of appeals as grounds for determining that these findings would break the case wide open and in their favor. This was always an extremely complex and uncertain case.
  3. President Trump is currently under siege by the media. I really don’t have the bandwidth to follow the play by play, but President Trump cares deeply about how he is perceived by the segment of the population that pushed him across the finish line in November. Even with Steve Mnuchin, a proponent of re-privitization, there would be very few, if any groups that would be in favor of re-privitization. Low interest rates and a strong housing market are major drivers of economic growth and have significant multiplier effects on jobs and GDP growth. Steve Mnuchin is tasked with making an unwinnable argument.

In closing, I too have made many investing mistakes, the hope is that we learn from them and become better investors. I sincerely hope that some readers readjusted their exposure downward after reading my three prior pieces.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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

Mnuchin To FBN: We can’t Fannie Mae Under government control for the next four years