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Volume 14 - Number 5

March 7, 2014

Judge Grants Fairholme Discovery Motion in GSE Shareholder Lawsuit

A federal judge last week granted discovery to attorneys for a hedge fund representing one group of Fannie Mae and Freddie Mac shareholders as it seeks to challenge the government’s August 2012 “net worth sweep” that effectively confiscates both GSEs’ profits. Fairholme Capital Management, founded by Wall Street veteran Bruce Berkowitz, controls roughly $2.4 billion (face value) of Fannie and Freddie "junior" preferred. Thanks to the September 2008 government takeover of the two firms, the U.S. Treasury controls the senior preferred and is effectively the owner of the two GSEs.

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With originations expected to drop in 2018, will your shop turn to non-QM/non-prime mortgage products as a way to bolster volumes?

Yes, definitely. We’re planning a launch.
No. It’s still difficult compliance/regulatory-wise.
Maybe. It’s under consideration.
Not now. But things could change as 2018 progresses.

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