District Court for the Southern District of Texas granted summary judgment to the FHFA on one of the last remaining claims in the Collins v. GSE lawsuit. The plaintiffs in the case, shareholders of Fannie Mae and Freddie Mac, alleged that the government overstepped its authority when it adjusted the stock-purchase agreements with the agencies and allowed net worth sweeps.
The court found that the FHFA had the authority to adjust the stock-purchase agreements under the Housing and Economic Recovery Act of 2008. The court also found that the net worth sweeps were a permissible exercise of the FHFA's conservatorship powers.
This ruling is a major victory for the government and a setback for the plaintiffs. It is likely to make it more difficult for shareholders to challenge the government's actions in the future.
The Collins v. GSE lawsuit is still ongoing, and the plaintiffs have other claims that they are still pursuing. This ruling is a significant blow to their case. I'm of the opinion that if the government didn't poney up with $191 billion dollars in capital injection Fannie and Freddie would not be here. The sweeps were intended to end in 2019 when it was guessed that both would either already have been made back as private companies or one died, or both. We in the mortgage market experienced huge profits in 2020- 2021 with interest rates falling into the two and a half to three percent range. Covid bad news created boom town for mortgage. In 2023 that has turned around to bust. With rates in the sevens and eights thousands of companies have filed bankruptcy and millions of employees are laid off. Back to the real topic- should preferred shareholders get money? If I'm on the jury I say no. Hey I lost $1,421,887 in the crash of 2008 and no one has offered to make me even pennies on the dollar.
Additional details about the ruling:
- The court found that the FHFA had the authority to adjust the stock-purchase agreements because the agreements were subject to the terms of the Housing and Economic Recovery Act of 2008.
- The court found that the net worth sweeps were a permissible exercise of the FHFA's conservatorship powers because they were necessary to protect the financial stability of the housing market.
- The court's ruling is a major victory for the government and a setback for the plaintiffs.
- The plaintiffs still have other claims that they are pursuing, but this ruling is a significant blow to their case.
- I expect we will see more class action cases not less
Legalese::
Plaintiffs claim that the Trump Administration would have ended the Third Amendment but for the unconstitutional constraints on presidential removal. Plaintiffs seek relief on six separate counts. These counts can broadly be split into two categories: (1) removal authority claims (Counts I, III, V, VI), and (2) Appropriations...
Removal authority claims, Plaintiffs request various forms of relief.
First, Plaintiffs ask the Court to declare that FHFA's structures violate the separation of powers doctrine and declare void the provisions of
HERA that insulate FHFA's director from oversight.
Second, Plaintiffs ask the court to enter an injunction restoring Plaintiffs to the position they would have been in if not for the removal restriction, including by directing Defendants to eliminate the liquidation preference and by
the Court to enter an order setting aside agency action maintaining Treasury's liquidation preference or compelling agency action to liquidate the preference. With respect to the Appropriations Clause claims, Plaintiffs ask the Court to declare FHFA's structures violate the separation of powers doctrine and declare void the provisions of HERA that fund FHFA permanently by assessments on regulated entities; vacate and set aside the Third Amendment or the PSPAs in their entirety; and enjoin FHFA and Treasury from implementing action under the Third Amendment. Finally, Plaintiffs ask for reasonable costs and any other relief the Court
