Preferred Stock Purchase Agreements Fannie Mae
Preferred Stock Purchase Agreements – What You Need to Know about Fannie Mae
If you’re in the real estate industry, you’ve likely heard of Fannie Mae. It’s a government-sponsored enterprise (GSE) that provides liquidity to the housing market by purchasing and guaranteeing mortgages. Fannie Mae also issues preferred stock to investors in order to raise capital.
If you’re considering investing in Fannie Mae preferred stock, it’s important to understand the terms of the preferred stock purchase agreements (PSPA). Here’s a breakdown:
What is a Preferred Stock Purchase Agreement?
A PSPA is an agreement between Fannie Mae and a preferred stock investor. The agreement outlines the terms of the investment, including the price, quantity, and conditions for purchasing the preferred stock.
Why Invest in Fannie Mae Preferred Stock?
Investing in Fannie Mae preferred stock can provide a steady stream of income in the form of dividends. The dividends are typically paid quarterly, and the yield can be higher than other types of investments, such as bonds or CDs.
What are the Terms of Fannie Mae’s PSPAs?
Fannie Mae’s PSPAs have several key terms that investors should be aware of:
1. Dividends: Fannie Mae pays dividends on its preferred stock, which are typically fixed-rate. The dividends are paid quarterly and are non-cumulative, meaning that if a dividend is missed, it will not be paid in the future.
2. Liquidation Preference: In the event of liquidation, preferred stockholders are paid before common stockholders. Fannie Mae’s PSPAs typically have a liquidation preference of $25 per share.
3. Redemption: Fannie Mae has the right to redeem its preferred stock at any time after five years. If Fannie Mae chooses to redeem its preferred stock, it must pay the liquidation preference to the investor.
4. Convertibility: Fannie Mae’s preferred stock is not convertible into common stock.
5. Limitations on Transfer: Fannie Mae’s PSPAs typically prohibit investors from selling or transferring their preferred stock without prior consent from Fannie Mae.
How to Invest in Fannie Mae Preferred Stock
Fannie Mae’s preferred stock can be purchased through a broker or financial advisor. Investors should research the terms of Fannie Mae’s PSPAs and consult with a financial advisor before investing.
In summary, Fannie Mae’s preferred stock can be a good investment for those looking for a steady stream of income. However, investors should be aware of the terms of Fannie Mae’s PSPAs before investing. As with any investment, it’s important to do your research, consult with a financial advisor, and make an informed decision.