Fannie Mae and Freddie
Mac (the GSEs) have taken what each is calling an important step toward ending their
12 years of operating under conservatorship.
Each has announced they are about
to issue a request for proposals (RFP) to secure a financial advisor to
facilitate that move.

In a press release, Freddie
Mac said the advisor selected will “advise the company on a range of issues,
from capital considerations to the company’s business plan, and may ultimately
play a role in any potential recapitalization transactions in the future”

The GSE’s were put
into conservatorship in August 2008 as losses mounted from defaulted mortgages they
had guaranteed. The Treasury Department then gave them access to billions of
dollars in operating capital in return for an equal amount of their senior
preferred stock. Over the ensuing years the two have paid dividends on that
stock far in excess of what they borrowed but have not been allowed to redeem
the stock nor retire any of the debt.

One of the main
sticking points to ending the conservatorship is the need to capitalize the
which until recently have not been allowed to retain any of their
profits. Common and preferred stock issued before the conservatorship is still
actively traded. Among the recent proposals has been a massive public offering
of stock, either with or without wiping out existing stockholders.

Freddie Mac CEO David
Brickman said, “Even as we work to stabilize the housing markets during this
unprecedented pandemic, Freddie Mac has remained focused on exiting
conservatorship responsibly. Today we begin the competitive selection process
for a financial advisor that will ultimately facilitate our return to full private
capital ownership.
This is a significant milestone, and we look forward to
making a thoughtful selection quickly.”

“While we are fulfilling our mission and helping to keep people in
their homes during this national emergency, we also remain committed to
ensuring a responsible exit from conservatorship,” said Hugh R. Frater,
Chief Executive Officer, Fannie Mae. “Today’s announcement is a
significant step on that path, and we look forward to making a timely selection
in the competitive process.”

At this writing there has been no announcement from the conservator, the
Federal Housing Finance Agency (FHFA) about the RFPs. However, Fannie Mae
points out that, “Engaging a financial advisor is an important milestone in
meeting Fannie Mae’s 2020 FHFA scorecard objective
to prepare a responsible
transition plan for a potential exit from conservatorship.”

By Jann Swanson , dated 2020-05-19 08:35:37

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Courtesy of Mortgage News Daily

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