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28 THE LEADER IN DEFAULT SERVICING NEWS Help shape the next issue of DS News. Drop us a line at Editor@DSNews.com. INVESTOR VOLUNTARILY DROPS 1 OF 2 LAWSUITS OVER GSE PROFITS Pershing Square Capital Management CEO William A. Ackman filed a voluntary notice of dismissal in the U.S. District Court for one of his company's lawsuits against the federal government over the sweeping of GSE profits into the U.S. Department of Treasury. Ackman filed two lawsuits against the government on consecutive days in mid-August over the handling of Fannie Mae and Fred- die Mac profits. Pershing Square is the largest non-government shareholder in GSE stock with about 170 million shares and close to $700 mil- lion invested in both GSEs combined. Pershing's stake in the two GSEs is about 10 percent. Pershing Square's first lawsuit, filed in the U.S. Federal Court of Claims, alleged that the diverting of GSE profits into Treasury, a practice started in 2012, equates to taking private prop- erty for public use without "just compensation," a practice forbidden by the Fifth Amendment of the U.S. Constitution. e lawsuit alleged that the diversion of GSE profits created a "windfall" for the government while shortchanging GSE shareholders. is suit is still active. e second lawsuit, filed in the U.S. District Court, claimed that Pershing Square was denied fundamental shareholder rights and that the Federal Housing Finance Agency (FHFA), conservator for both GSEs since 2008, refused to allow Pershing Squire to inspect books and records despite written demands made by Persh- ing to the FHFA board of directors to do so. e second complaint also called for the GSE profits being diverted to Treasury, which amount to bil- lions of dollars, to be divided among the GSE's common shareholders. is is the suit that Ack- man voluntarily dismissed. Two similar lawsuits filed in 2013 by inves- tors Fairholme Funds and Perry Capital were dismissed by a judge in late September, with the judge ruling that the sweeping of GSE profits into Treasury was legal under the Housing and Economic Recovery Act. Both Fairholme and Perry have appealed the judge's decision. Ana- lysts suggest that Ackman anticipated a similar ruling on his lawsuits and that he dropped the suit in order to avoid a lengthy appeals process. In mid-October, both Pershing Square and Fairholme announced they had shored up their stock in Fannie Mae and Freddie Mac. e federal government seized control of Fannie Mae and Freddie Mac in September 2008 at the height of the nation's financial crisis, after which Treasury provided $188 billion to bail out the companies. Fannie Mae and Freddie Mac have since become profitable and have returned $218.7 billion in dividends to taxpayers. e Obama administration wants to phase out the two GSEs, which have been in conservator- ship since the government takeover six years ago. Percentage of all mortgages nationwide that were in foreclosure in September 2014, down from 2.3 percent from September 2013. Source: CoreLogic STAT INSIGHT 1.6%