Last Updated: 15 hours ago Bill Ackman Wants to Suggest a Fannie and Freddie Deal By Karishma Vanjani CONCLUDED Trump Urges Republicans to Vote to Release Epstein Files Bill Ackman, founder and CEO, Pershing Square Capital Management. (PATRICK T. FALLON/AFP via Getty Images) Billionaire hedge fund manager Bill Ackman is going to suggest a plan involving Fannie Mae and Freddie Mac, the mortgage-finance giants under government control, over a livestream tomorrow. Ackman, who first made the announcement last w ...

Core Insights - Freddie Mac has introduced a next-generation automation technology called Quality Control Advisor Plus to enhance its Single-Family quality control process, aiming to improve loan quality, efficiency, and reduce costs [1][2] Group 1: Technology and Efficiency - Quality Control Advisor Plus is expected to significantly reduce the quality control process duration for lenders, potentially cutting months off the current timeline [2] - The platform integrates previously separate quality control systems, providing a unified solution for over 500 participating lenders, which has already resulted in millions of dollars saved in performing loan repurchases [2][3] - The new system offers real-time alerts for issues like missing documents, streamlining communication and feedback on loan quality, thus minimizing delays and enhancing the overall review process [3][4] Group 2: Standardization and Communication - The solution aims to standardize decision-making and communication through new messaging aligned with industry standards, ensuring reliable feedback for lenders [4] - Lenders can now upload up to 250 files simultaneously and receive immediate confirmation of receipt, which eliminates uncertainty and accelerates the process [4] Group 3: Addressing Loan Defects - Income-related deficiencies are identified as the primary cause of loan defects, prompting Freddie Mac to introduce a new income calculator to help lenders assess borrower criteria more accurately [5] - Over 1,000 lenders are utilizing this tool, resulting in more than 15,000 submissions aimed at reducing loan defects and repurchase risks [5] Group 4: Market Impact and Feedback - Lender repurchase requests have decreased by 56% from their peak in 2023, indicating a positive trend in loan quality as a result of the new initiatives [6] - Industry feedback regarding Freddie Mac's recent actions to enhance loan quality has been overwhelmingly positive, reflecting the effectiveness of the new technology and processes [6]

Core Viewpoint - Billionaire hedge fund manager Bill Ackman is proposing a new plan for Fannie Mae and Freddie Mac aimed at optimizing taxpayer value and minimizing mortgage spread risks [1][3]. Group 1: Proposal Details - Ackman will present his plan during a livestream event on November 18, which he believes will benefit the Trump administration and taxpayers [1]. - The proposal could potentially allow the U.S. Treasury to show a mark-to-market value for its shareholdings in Fannie Mae and Freddie Mac [1]. - Ackman’s company, Pershing Square, is the largest common shareholder of both firms, holding over 210 million shares combined [2]. Group 2: Previous Suggestions - Earlier in the year, Ackman suggested merging Fannie Mae and Freddie Mac into a single entity to reduce costs and lower mortgage rates, which he believes would simplify the housing-finance system and unlock shareholder value [2][4]. - The new proposal aligns with the Trump administration's investigation into making housing more affordable, including the consideration of a 50-year mortgage [3][4]. Group 3: Market Impact - Ackman's proposal has the potential to reshape the housing market and the operations of Fannie Mae and Freddie Mac, impacting various stakeholders involved [3][4].

Core Viewpoint - Billionaire hedge fund manager Bill Ackman is set to unveil a new proposal regarding Fannie Mae and Freddie Mac, which have been under federal conservatorship since the 2008 financial crisis [1] Group 1: Proposal Details - Ackman's plan aims to help the Trump administration achieve objectives such as maximizing taxpayer value, reducing mortgage spread risks, and allowing the U.S. Treasury to show a mark-to-market value for its holdings in Fannie Mae and Freddie Mac [2] - A livestream event is scheduled for November 18, where Ackman will detail the proposal, with the potential for the transaction to be completed by year-end [4] - Ackman clarified that Pershing Square has not sold its stake in Fannie Mae and Freddie Mac and remains the largest common shareholder with over 210 million shares combined [4] Group 2: Background on Fannie Mae and Freddie Mac - Fannie Mae and Freddie Mac are government-sponsored enterprises that play a crucial role in the U.S. housing-finance system by purchasing mortgages, bundling them into securities, and guaranteeing those securities for investors [8][9] - Together, they back or own approximately half of all U.S. residential mortgages, amounting to about $12 trillion in outstanding debt [11] - Both entities were placed under federal conservatorship in response to significant losses during the 2008 financial crisis [12] Group 3: Housing Market Context - Ackman's announcement coincides with the Trump administration's exploration of new housing affordability measures, including a proposed 50-year mortgage, despite concerns about increasing long-term debt for borrowers [15]

Group 1 - The article emphasizes a strong buy recommendation for Farmer Mac (AGM), indicating a positive outlook on the stock's performance [1] - The author highlights a focus on European small-cap investments, advocating for a balanced portfolio of dividend and growth stocks [1] - The investment group European Small Cap Ideas is mentioned as a source for exclusive research on European investment opportunities, particularly in the small-cap sector [1] Group 2 - The article notes that the author holds a beneficial long position in AGM shares, indicating personal investment confidence in the company [2] - The author also has long positions in Series F and Series G preferred shares, further demonstrating commitment to the investment [2]

Financial Data and Key Metrics Changes - The company reported a GAAP net loss attributed to common stockholders of $0.6 million or negative $0.01 per basic common share, which includes a benefit from credit losses of $1.6 million or $0.03 per basic common share [17] - Distributable loss for the quarter was $18.9 million or negative $0.40 per basic common share, including write-offs of $19.8 million or $0.42 per basic common share [17] - The book value as of September 30th was $7.94 per common share, a decline of $0.05 per share from Q2 [18] - The aggregate CECL reserve at September 30th was about $134 million, down from $155 million last quarter [18] - Total leverage decreased slightly from 2.1 times to 1.9 times [19] Business Line Data and Key Metrics Changes - The total loan portfolio commitments ended the third quarter at $1.8 billion, with an outstanding principal balance of $1.7 billion [11] - The realized loan portfolio yield for the third quarter was 7.5%, up from 7.1% in the prior quarter [11][12] - The weighted average risk rating of the portfolio held steady at 2.8 [11] Market Data and Key Metrics Changes - Investor sentiment improved through the third quarter, with increased confidence in deploying capital into the recovering commercial real estate market [5] - The commercial real estate market remains uneven, with the middle market loan segment being compelling for certain property types like multifamily and industrial [6] Company Strategy and Development Direction - The company plans to focus on loan repayments and asset resolutions while maintaining higher levels of liquidity, expecting to return to core lending and origination efforts in mid-2026 [9][16] - The company is actively repositioning REO assets and investing capital to maximize outcomes [7][16] Management's Comments on Operating Environment and Future Outlook - Management noted that while the re-liquidation of the commercial real estate market is underway, it remains uneven and bifurcated [6] - The company anticipates a longer resolution timeline for certain loans due to persistent local market challenges, but sees positive trends in the return to office mandates [15] Other Important Information - The company reduced the balance of its higher-cost secured credit facility by $7.5 million and extended the maturity to December 2026 [10] - The company had about $63 million of unrestricted cash at the end of the quarter [19] Q&A Session Summary Question: What are the company's plans for asset resolutions and growth? - Management emphasized the ongoing efforts to resolve assets and position for regrowth in 2026, highlighting the team's dedication to these plans [21]

Financial Data and Key Metrics Changes - The company reported GAAP net income of $0.29 per share and adjusted distributable earnings (ADE) of $0.53 per share, marking a new quarterly high for ADE since its introduction in 2022, significantly exceeding the $0.39 per share dividends for the quarter [5][11][20] - Total portfolio holdings grew by 12% during the quarter, driven by non-QM, proprietary reverse mortgage, and commercial mortgage bridge loans [7][20] - The economic return for the third quarter was 9.2% annualized, with book value per share at $13.40 [20] Business Line Data and Key Metrics Changes - In the credit portfolio, net interest income grew sequentially, with $0.42 per share from credit, $0.04 from agency, and $0.09 from Longbridge [11][12] - The Longbridge segment had strong contributions from both originations and servicing, with origination profits driven by higher volumes of proprietary reverse mortgage loans [14][15] - The adjusted long credit portfolio increased by 11% to 3.56% quarter over quarter, while the Longbridge portfolio increased by 37% to $750 million [15][17] Market Data and Key Metrics Changes - The company noted a favorable environment for agency RMBS due to lower interest rates and reduced volatility, which supported portfolio performance [13] - The securitization market has become more liquid and commoditized, attracting a larger universe of investor-grade bond buyers, which has tightened spreads [70] Company Strategy and Development Direction - The company is focusing on diversifying its funding sources and reducing reliance on short-term repo financing, as evidenced by the successful pricing of $400 million in senior unsecured notes [10][21] - There is an emphasis on technology investments to enhance loan origination efficiency and expand the range of products offered by affiliate loan originators [23][25] - The company plans to expand its footprint in the securitization markets and is optimistic about purchasing seasoned mortgage loan portfolios from banks [25][27] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about potential economic cracks, including recent corporate bankruptcies and weakened job formation, but remains focused on maintaining credit quality [21][22] - The company anticipates continued strong performance in the fourth quarter, with robust securitization activity and origination volume [29][30] - Management highlighted the importance of maintaining a disciplined risk management approach while pursuing high returns [32] Other Important Information - The company has seen a significant increase in securitization volumes, with 20 securitizations priced year to date, more than triple last year's pace [6][9] - The percentage of borrowings subject to mark-to-market margining declined to 61% from 74% month over month, indicating improved financing terms [19] Q&A Session Summary Question: Discussion on loan originator platforms and valuations - Management noted that strong earnings performance has driven higher book values and liquidity for loan originator platforms, leading to improved valuations [35][36] Question: Opportunities in buying loans from banks - Management confirmed that recent transactions involved residential mortgage loans from smaller banks, indicating a trend of banks restructuring portfolios due to lower yields [40][41] Question: Credit performance and allocation of capital - Management highlighted that credit performance remains strong, particularly among higher-end borrowers, while being cautious about potential impacts from layoffs in the labor market [46][47] Question: Longbridge portfolio and leverage - Management stated that Longbridge does not require more leverage to achieve target returns, as most equity is in high-yielding servicing [75] Question: Non-QM market and convexity risk - Management emphasized the importance of understanding prepayment risks and noted that the Non-QM market has become more liquid and attractive due to tighter spreads [77][81]

Financial Performance - Net income was $29.5 million, or $0.29 per share[11] - Adjusted Distributable Earnings were $54.2 million, or $0.53 per share[11] - The economic return for the quarter was 2.2% (non-annualized)[11] - Book value per common share was $13.40 after total dividends declared of $0.39 for the quarter[11] Portfolio Composition and Performance - The adjusted long credit portfolio increased by 11% to $3.56 billion[11, 19] - The long Agency portfolio decreased by 18% to $220.7 million[11, 27] - The Longbridge portfolio increased by 37% to $750.0 million[11, 30] Leverage and Capital Structure - The recourse debt-to-equity ratio was 1.8:1[11] - The total debt-to-equity ratio was 8.6:1, including all non-recourse borrowings[11] Loan Origination - Loans Acquired During Q3 2025 totaled $1806.5 million, including Non-QM Loans ($994.4mm), Residential Transition Loans ($186.9mm), Commercial Mortgage Loans ($126.6mm) and Reverse Mortgage Loans ($498.6mm)[37]

Group 1 - Freddie Mac has released its 2026 funding calendar, which includes optional announcement dates for Reference Notes and Reference Bills securities [1][2] - The issuance size and frequency of Reference Notes and auctions for Reference Bills will depend on the company's funding needs and market demands [1][3] - Reference Bills auctions will occur weekly on Monday mornings, with adjustments made if Monday is a holiday, and all auctions will close at 9:45 a.m. Eastern time unless stated otherwise [3] Group 2 - Freddie Mac's mission is to enhance liquidity, stability, and affordability in the housing market, supporting families in buying, renting, or maintaining their homes since 1970 [5]

Core Insights - Freddie Mac presented its Third Quarter 2025 Financial Results, indicating a focus on key business drivers and financial performance [1][2]. Group 1 - The presentation was led by Christopher Spina, Vice President of Public Relations and Digital Communications, alongside Jim Whitlinger, Executive Vice President and Chief Financial Officer [1]. - The company highlighted that forward-looking statements may be made during the call, which are based on assumptions about business drivers and other factors that could lead to variations in actual results [2]. - A replay of the call will be available on the company's website, emphasizing the importance of the information shared during the presentation [3].