- What's at Stake: Whether many GSE shareholders are one step closer to winning a lawsuit with monetary stakes.
- Supporting Data: A collective payment estimated to be nearing $1 billion
- Forward Look: FHFA has 90 days to decide whether to petition the Supreme Court.
Overview bullets generated by AI with editorial review.
A federal appeals court has rejected the Federal Housing Finance Agency's petition for an en banc review of a decision favoring certain government-sponsored shareholders in the Fairholme Funds case.
The U.S. Court of Appeals for the District of Columbia Circuit denied the FHFA's petition for the full bench to rehear the case with a terse filing stating there was "an absence of a request by any member of the court for a vote."
"We think that was the appropriate and the right outcome. We're very pleased the court saw it the same way," said
The denial means GSE shareholders, with the exception of those who hold Fannie Mae common stock, could receive some portion of a pending payment in the case estimated to be near $1 billion, according to Hume.
(Fannie common shareholders were excluded from the case because that GSE is incorporated in Delaware, where dividends are discretionary. Freddie Mac is incorporated in Virginia, which has different rules. Junior preferred shares at Fannie are included in the case due in part to other contractual privileges they have.)
The remaining hurdle for investors
After this ruling, the FHFA does have another opportunity at overturning the verdict, by going to the nation's highest court.
"There's an open question of whether FHFA takes one last shot by filing a petition to the Supreme Court," he said.
FHFA will have 90 days to decide whether or not to file a Supreme Court petition and investors would oppose this if it were to come to pass, according to Hume.
"I think that to do that, they need the Solicitor General at the Department of Justice to both approve it and file it for them. At least that would be the typical procedure," Hume said.
A FHFA spokesperson had not responded to an inquiry about this at the time of this writing.
The FHFA's position has been that it had powers and immunity under the Housing and Economic Recovery Act to engage in a temporary
The case has pitted the FHFA's claims on the net worth sweep along with the Supreme Court ruling in Collins v. Yellen against investors' rights under contract law, which plaintiffs have argued are distinct.
Hume has said investors could get paid in the next year or so if FHFA does not petition the Supreme Court.
"The mechanics of claim submission and claim distribution, we'd like to get that rolling sooner rather than later, so that you know that the amounts can be distributed as soon as possible," he said.
Both legacy shareholders from before the GSEs went into conservatorship and those that purchased stock from them could receive the payments if they hold anything other than Fannie common, according to Hume.
Although FHFA Director Bill Pulte showed interest in a new GSE stock offering at one point there have not been any since Fannie and Freddie went into conservatorship in 2008.
