In January 2017, Federal National Mortgage Assctn Fnni Me (OTCMKTS:FNMA)‘s Book of Business surged at a compound yearly rate of 2.3% in January. Gross Mortgage Portfolio surged at a compound annualized pace of 2.8%. The Conventional Single-Family SDR came flat at 1.20% in January while the Multifamily SDR was flat at 0.05%.
Federal National Mortgage closed 6,300 loan adjustments in January. It should be noted that the firm has been under conservatorship of the Federal Housing Finance Agency since September 2008. It has remained a tough month for shareholders of Federal National and Federal Home investors.
Shares of both Freddie Mac and Fannie Mae are down over 32% in the preceding month after a petitions court upheld a verdict against investors challenging the impropriety of the terms of the conservatorship. Specifically, investors consider the government’s net-worth sweep of 100% of the two firms’ profits is unconstitutional.
Infowars released a summary of the typical argument that Freddie and Fannie shareholders expected would get them a favorable court verdict. During the financial crisis, Freddie and Fannie got caught in mortgage debt and required a bailout from the government. Under the bailout contract, the GSEs were put under conservatorship. The two GSEs released the Treasury preferred shares worth $1 billion with a yearly dividend yield of 10%. Also, the U.S. Treasury was released warrants to buy 79.9% of Fannie and Freddie’s shares for $0.00001 per share.
Neither turned profitable from 2008 to 2011, and therefore they were forced to released more preferred shares to the U.S. Treasury to pay dividends. Federal National finally became profitability in 2012 and was in a position to distribute dividends out of firm’s income for the first time. Unfortunately for company’s shareholders, the U.S. Treasury made a change to the terms of the contract shortly thereafter. Starting in 2012, the company were said to pay 100% of net income to the U.S. Treasury.