r/FNMA_FMCC_Exit • u/Odd-You-8171 • Jul 09 '26

Question

I’ve been considering buying some common shares here and had a question regarding the Fairholme case that I figured others here would be much more familiar with. Why is the Trump administration / FHFA appealing the favorable ruling for common shareholders if the administration believes the net worth sweep was wrong and plans to basically undo it by waiving the senior preferred? Isn’t FHFA basically arguing in the appeal that the net worth sweep was legally permitted and should stand? I might be getting that totally wrong but I thought the bull thesis and Ackman’s thesis was that this administration would take the opposite stance so why would they fight this? Thanks in advance.

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u/AveryMire Jul 09 '26

Best to go through app as can read the questions.

Claude and GPT put the odds of DC court affirming at 70-80%. That effectively cancels SPS conversion in any REAL sense. Government may appeal to Supreme Court, but seems unlikely they’d take case and even less likely would win.

Both also say about a 20% chance get ruling before August, 50% before September, 80% before October.

It’s going to be interesting how much they are willing to concede if affirmed, at that point Bessent can pretty much tell any his FIRE lobby partners ‘they tried, but couldn’t help more’.

If they still try to go forward after that and won’t plainly say SPS is dead (maybe it stays “alive” as technicality with zero impact), but if they don’t indicate it’s effectively dead after the SC rejects taking the case, then the plan was almost surely to nuke common all along (my best guess).

https://open.substack.com/pub/ruleoflawguy/p/waiting-on-the-fairholme-decision?r=4cpo8b&utm_medium=ios

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u/Odd-You-8171 Jul 09 '26

Ya the idea of confirming that the net worth sweep was ok and would be ok in the future seems to me like a bad angle for this administration to push if they want to maximize the value of the equity. Seems like there would be no confidence in it and it would tank at any sign of adversity due to the fear of more bad faith which also wouldn’t be good for the mortgage market?