Last week, Fannie Mae (FNMA) and Freddie Mac (FMCC) reported annual net income of $12.3 billion and $7.8 billion, respectively. This remarkable performance – their fifth straight year of positive earnings, with growing books of business – is further proof that these indispensable mortgage insurers have been successfully rehabilitated. Fannie Mae and Freddie Mac are fulfilling their historic role of ensuring adequate levels of liquidity to lenders of all sizes. In 2016, Fannie Mae and Freddie Mac provided almost $1.1 trillion in mortgage financing to America’s housing market, enabling millions of American families to buy, refinance, or rent homes. Today, after eight long years in federal conservatorship, Fannie Mae and Freddie Mac stand irreversibly transformed: both companies are back to basics, squarely focused on executing their core mission of providing liquidity, access to credit, and affordability to qualified borrowers in all U.S. housing markets at all times. No one does it better.
Despite their robust profitability and significant operational improvements, the Federal Housing Finance Agency (“FHFAâ€), in its capacity as conservator, “sabotage[d] the Companies’ recovery by confiscating their assets quarterly to ensure they cannot pay off their crippling indebtedness.â€1
By imposing the so-called “Net Worth Sweep†on Fannie Mae and Freddie Mac in August 2012, FHFA enabled the United States Treasury “to loot the Companies to the guaranteed exclusion of all other investors.â€2 These statements, attributable to Judge Janice Rogers Brown in a split decision issued yesterday by the United States Court of Appeals for the District of Columbia Circuit (the “Courtâ€), accurately reflect the basis for our legal actions against the government.
In that February 21st Opinion, the Court was divided 2-1 on a case in which we sought to protect our rights as Fannie Mae and Freddie Mac preferred shareholders. We have long maintained that the Net Worth Sweep impermissibly eliminates the rights of preferred shareholders to any return of their principal (i.e., the liquidation preference) or any return on their principal (i.e., dividends). In fact, since 2013 we have emphasized that this litigation seeks nothing more than the enforcement of existing rights associated with ownership of Fannie Mae and Freddie Mac preferred stock – rights that transfer with the sale of the securities.
