American Nightmare – The Plight of GSE Investors and American Homeowners

By Sydney Sullivan

This will be one of several posts on the future of Fannie Mae and Freddie Mac. Your thoughts and your owns stories are welcome in the comments section.

Nearly a decade ago, in September 2008, US Treasury Chief Hank Paulson unveiled his historic government takeover of twin mortgage buyers, putting the government in charge of the mortgage giants and the $5 trillion in home loans they back. The plan eliminated the top executives which were out and replaced with Wall Street titans.

The House Oversight and Government Reform Committee held a hearing on the financial collapse of Fannie Mae and Freddie Mac, their takeover by the federal government and their role in the financial crisis. The video below is a 4 hour review of a planned response to the crisis in the housing and mortgage markets at the time of the economic meltdown and crash of 2008.

The titans that replaced Freddie CEO Richard Syron and Fannie CEO Daniel Mudd  were two Wall Street finance veterans and were charged with restoring the mortgage magnates to health. Herb Allison formerly served as president of Merrill Lynch was selected to head Fannie Mae. David Moffett, who served as vice chairman and chief financial officer of U.S. Bancorp until early 2007 took over Freddie Mac. In addition to the ousting of GSE management – the companies were placed in a Conservatorship, controlled by the HERA Act under governance of a new agency FHFA and the US Treasury.

Fannie Mae and Freddie Mac are private, shareholder-owned corporations created by Congress to increase liquidity and stability in the secondary market for home mortgages. While the Companies are commonly referred to as “Government Sponsored Enterprises” or “GSEs,” they are for-profit corporations, and had traditional corporate governance structures—including shareholders, directors, and officers.

Under the Conservatorship, shareholders, directors, and officers and their investments were left in limbo. None of these folks, average Joes who purchased common stock, as well as Hedge Funds and their investors that were in preferred positions, have been able to access their money or pension funds since 2008.

For decades, the GSEs had been two of the world’s largest privately-owned financial institutions —with their portfolios having a combined value of $5 trillion and accounting for “nearly half of the United States mortgage market.” When they needed capital, they issued common stock, numerous classes of preferred stock, and debt securities, all of which were publicly traded on the U.S. capital markets.

Rolling forward 10 years later, we’ve recently learned that Fannie and Freddie were not in dire straits and that their funds have been looted by the Obama administration / Treasury in quarterly Net Worth Sweeps stripping BILLION$ away from what were private corporations.

These Net Worth Sweeps funds included wrongful foreclosure blood money. You see, Fannie and Freddie were the golden geese with access to over 84 MILLION residential homes and untold commercial projects. Wall Street needed these giants under their control – not the public. Sound familiar?

On top of  the American goldmine – the Wall Street Globalists were branching out into England, Ireland Europe pulling the same securitization / rehypothecation scheme over there.

You’ve probably listened to a least some of the video above or recall the news stories all designed to defame the GSEs and provide a cover for Wall Street banks to takeover the entities, that before the repeal of Glass Steagall belonged solely to the public and for public benefit. Fake News dominated back then too, we just didn’t know what it was. We lost our housing industry because Wall Street devised an UNREGULATED securitization program to siphoned off middle class American wealth.

DID WE WAKE UP IN THE SOVIET UNION?

The GSE investors have had enough. They’ve pushed out the truths about the Fake Failing GSEgate – who would and could have survived without Conservatorship; and exposed the Net Worth Sweeps were used to prop up Obamacare. The Investors sued. Having differing opinions from different federal circuits, they filed a PETITION FOR A WRIT OF CERTIORARI in the Supreme Court of the United States, which outlines the overall saga. *Just a warning before you begin to read the document – you are going to be pissed. Make no doubt about it – you’ll be wondering if we have been living in the Soviet Union (maybe it moved to Wall Street). CLICK HERE

Just to give you an idea of a Judge’s dissenting opinion of this extreme hardship:  Judge Brown in Perry Capital, LLC v. Mnuchin, 848 F.3d 1072 (D.C. Cir. 2017) summarized the Net Worth Sweep in her dissent:

“It was, to say the least, a highly unusual
transaction. Treasury was no longer
another, admittedly very important,
investor entitled to a preferred share of the
Companies’ profits; it had received a
contractual right from FHFA to loot the
Companies to the guaranteed exclusion of
all other investors….”

To be fair, even before 2008 the GSEs were on a destructive path driven by UNREGULATED derivatives and a very greedy and corrupt Wall Street. We’d all agree on that. But as we have posted many times, after 2003 the banks ramped their scheme, sucked in homeowners and used computer intelligence rather than common sense and ethics and morals. At least with investors, directors and officers – homeowners had somewhere to go to assert issues.

After 2008, there was no one to investigate, tons of paper laundering, and fraudulent concealment kicked in – and thrives!

Now that the truth is surfacing fast and furious, the GSEs may have the opportunity to be free’d from financial bondage and operate as the founders intended them to. However, its been floated, like a rock in a punch bowl, that maybe one of the TBTF banks would buy them…Merrill Lynch, perhaps? Its doubtful a sale to Merrill Lynch, Wells Fargo, BoA, US Bank, or Chase would please the American public who have even less trust in the banks than they do Congress or Fake News.

WHAT CAN WE DO ABOUT THIS AND SAVE OUR HOMES – HOW CAN WE HELP?

What can we do to protect American homeownership? There are some good plans floating about to rebuild the companies and save everyone including the average Joes.

Here’s another idea. Fannie and Freddie were designed for OUR American homeowners who have been screwed by the banks. A scheme devised with inflated appraisals, LIBOR rigged short term ARM loans, relaxed underwriting guidelines and computer technology programmed to design loans to default in order to maintain securitization liquidity while allowing rehypothecation unknown to anyone other than the banks. We need Glass Steagall back.

Let’s keep the GSEs privately traded companies with investors, directors and officers, not TBTF banks running the operation or we’ll just have more of the same corruption. Its time to cut out the gravy train. AND let’s incorporate homeowners into the investor pool.

Here’s the plan: Fannie and Freddie issue common shares. Since the paper these old loans were written on is loaded with fraud and forgery – let’s call a Mortgage Amnesty between homeowners and the GSEs …and banks (if we have to).

All loans written between 2003 – 2008 may be refinanced through the GSEs with legitimate market value appraisals, low interest rates 2-3% (remember folks, we’re compensating for the fraud), full disclosure about securitization, electronic signature authorizations – no more faux Mortgage & Notes. Transparency!

  • There would be a Mortgage Amnesty offering open for 2 years.
  • Homeowners can opt to refinance which means they will pay closing costs (appraisals, title search, etc.) and dump their old paper for clean documents and know where their loans are. You’d be pre-approved as long as your taxes, insurance and HOA/AOAO dues are current.
  • In addition, homeowners will agree to buy 10 shares of GSE stock (a new savings program) at hypothetically $60 each share = $600 which is wrapped into the closing costs.
  • Now homeowners would become partners/shareholder with investors. Yes, you can buy more shares if you want. But like your credit union, you’ll have a voice because you’ll be a shareholder.

We’ll be helping investors become a strong voice if we’re all united. The wrongful seizure would never have happened if 84 million homeowners had a stake in the company. And if homeowners participate, when servicing laws are violated we’ll have the mortgage giants to help get it corrected – fast.

The math (not my specialty but simply) says even if only 50 million homeowners [out of over 125+ million American homeowners] participated in the Mortgage Amnesty:

50 Million Homeowners X $600 is according to Siri, “about $30 BILLION.” That a pretty good IPO (not versed in Hedge Fund speak either). But this seems like something that should morally and ethically be considered, given the past decade of pain and sorrow and corruption inflicted upon all of us.

It would lessen the burden on the courts, eliminate the forgeries in the recording offices, clean up titles, and Make American Families more productive again. No more worrying about losing their home.

This was simply the first in a series of posts – because our nation’s economy depends upon housing, whether we currently own, rent or buy. We need to unite and make it better and safer than it has been in the past. The time is now.

If you like this idea – post it, Tweet it, Facebook it – and call you Congressional Representatives (House & Senate) or email them a link. Get the idea circulating and add your thoughts and ideas. United We Stand – and have a much stronger voice!

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10 thoughts on “American Nightmare – The Plight of GSE Investors and American Homeowners

  1. Gary Victor Dubin Dubin Law Offices Harbor Court, Suite 3100 55 Merchant Street Honolulu, Hawaii 96813

    gdubin@dubinlaw.net (808) 537-2300 (office) (808) 392-9191 (cellular) (808) 523-7733 (facsimile)

    Licensed in California and Hawaii

    >

    • You and millions of other people feel the same way. Not to make this anymore political than it already is – Now that we are learning where the foreclosure blood money was funneled, by order of Obama presidency and administration, to prop up Obamacare and other left-leaning organizations (actually a full and detailed investigation needs to launched – if it hasn’t been already), you need to think seriously about whether your sacrifice was worth underwriting Obamacare… and what direction you want the country to move forward.

  2. The ‘Average Joe submitted a plan, now in the hands of FHFA:

    “1. Immediate relinquishment of the so called 3rd Amendment of the PSPA known as the Net Worth Sweep
    2. Deem the Senior Preferred fully paid and cancel the shares
    3. Deem the warrants for approximately 80% of the companies Null and Void
    4. Order Fannie Mae and Freddie Mac to issue to the Treasury 500 Million to 1 Billion Common Stock Equity Options with a strike price of $60 a share. This exercise price is chosen because the companies’ boards have the power to deem the share price whatever stock price value they want. Also, because $60 would make all employee retirement savings whole. So many employees lost their savings from the 2008 crisis. Many of them trusted Fannie and Freddie not to fail.
    5. Issue Fannie Mae and Freddie Mac a capital buffer equivalent to $30 to $60 B representative of the exercisable $60 option strike price proceeds that would go to the companies upon execution of the option(s). This equivalent buffer could be reduced as the government executes its options. This plan gives not only the shareholders vested interest in the value of the companies, but also the government. All stakeholders will have an interest for the companies to command great equity value. For example, if the share price goes to about $1000 a share (before forward stock splits), the government could make over a Trillion dollars in combined proceeds from exercised options and from taxable capital gains.”

  3. Why not simply declare Fannie & Freddie as SIFI enterprises under FSOC as enacted under Dodd-Frank? Worked for AIG. Establishes the same reserve/capital/buffer standards for gses as are used by TBTF banks. Eliminates the distraction of Congressional reform because the process is already in place to conserve and preserve.

  4. Pingback: American Nightmare – The Plight of GSE Investors and American Homeowners

  5. It will depend on who gains control of the assets too. That was many years of the American people’s assets wrapped in here. Is this addressed here? This was what 2 Trillion from Social Security and 1.5 Trillion from pensions?

    • Let’s talk about that. How many mutual funds do you know of that included GSE shares? If you can name them, or if anyone can, it will help people identify that they’ve been affected. For example, Vanguard is one. And did the mutual fund companies send notification that GSE shares were included and were on non-performing status while under House arrest? (Conservatorship doesn’t quite describe the seizure as well).

  6. ONLY THE TREASURY

    (Dum-dum-dum-dumb-move
    Oh-no-no-no-nooo
    Oh-oh-oh-oh-why
    Only the Treasury
    Only the Treasury)

    Only the Treasury (dum-dum-dum-dumb-move)
    Are stealin’ GSE profits (oh-no-no-no-noo)
    All but the Treasury (dum-dum-dum-dumb-move)
    Know this stealin’ ain’t right (dum-dum-dum-dumb-move)

    At the end of this quarter
    They’ll make their sweep
    Profits gone forever
    Theft that they keep
    But only the Treasury
    Knows why they lie
    Only the Treasury

    (Dum-dum-dum-dumb-move
    Oh-no-no-no-nooo
    Oh-oh-oh-oh-why
    Only the Treasury
    Only the Treasury)

    Only the Treasury (dum-dum-dum-dumb-move)
    Know when their theft will be through (oh-no-no-no-noo)
    Only the Treasury (dum-dum-dum-dumb-move)
    Know they’ve lied and lied to you (dum-dum-dum-dumb-move)

    Maybe next quarter
    Mel Watt will dance
    Alone or with Congress
    But that’s the chance
    Mel’s gotta take
    Or investors’ lowly hearts’ break
    Only the Treasury

    (Dum-dum-dum-dumb-move)

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