On March 27th, President Trump issued a memorandum to the Secretary of the Treasury and the Secretary of Housing and Urban Development directing them to craft housing finance reform plans. The directive to Treasury listed āending the conservatorships of the GSEsā as its first goal and instructed Treasury to specify for each reform included in the plan āwhether the proposed reform is a ālegislativeā reform that would require congressional action or an āadministrativeā reform that could be implemented without congressional action. For each āadministrativeā reform, the Treasury Housing Reform Plan shall include a timeline for implementation.ā A response from Treasury is expected in the next two to three months. We believe the memorandum is notable as it: (1) is by far the most explicit directive on housing finance reform from President Trump to date, (2) pushes for a prompt resolution, and (3) is consistent with the housing finance goals that Treasury Secretary Mnuchin has repeatedly articulated since the 2016 election.
On April 4th, Mark Calabria was confirmed by the Senate as the new Director of the FHFA, Fannie and Freddieās primary regulator. Dr. Calabria has since given a series of recent interviews in which he has shared his views on the potential reform path for Fannie and Freddie. Dr. Calabria has stated that he expects that āsometime in the fall, Treasury and I will hopefully come to an agreement. That will allow us, later in the year, to suspend the net worth sweep and start to build capitalā and that an IPO could happen āperhaps [in the] first half of next year.ā
FNMA (FNMA, Financial) and FMCC common shares have increased 143% and 135% respectively, year-to-date. FNMA and FMCC preferred shares have both increased 66% year-to-date.
From Bill Ackman (Trades, Portfolio)'s first-quarter 2019 Pershing Square shareholder letter.
