Freddie Mac (OTCQB:FMCC) and Fannie Mae (OTCQB:FNMA) (F&F) are government-sponsored enterprises (GSEs). F&F common and preferred shareholders’ investments will be affected by ongoing litigation challenging the direct expropriation and de facto nationalization of the GSE’s. For those seeking political alpha, i.e., increased returns resulting from changes in public policy, there is a case to be made that favorable developments could occur in the next few months with respect to several ongoing court cases.
Litigation is underway with respect to the “3rd Amendment” to the Senior Preferred Stock Purchase Agreements (SPSPAs) between the Federal Housing Finance Agency (FHFA) and the U.S. Treasury (Treasury), which created a “net worth sweep” (NWS).
In this Seeking Alpha article, I present my current “working hypothesis” with respect to the…