For mortgage sector stocks, Fannie and Freddie ruling was positive

Change in direction could benefit mortgage originators

National /
Jun.June 28, 2021 05:00 PM
Shares of Rocket Cos and LoanDepot rose while shares Fannie Mae and Freddie Mac plunged after Supreme Court ruling (Unsplash)
Shares of Rocket Cos and LoanDepot rose while shares Fannie Mae and Freddie Mac plunged after Supreme Court ruling (Unsplash)

The stock prices of Fannie Mae and Freddie Mac plunged following a recent Supreme Court ruling, but some big players in the mortgage sector could end up benefiting from the decision, the Wall Street Journal reported.

In its ruling last week, the Supreme Court declined to dismantle the Federal Housing Finance Agency, which was created in the wake of the Great Recession to oversee Fannie Mae and Freddie Mac. The ruling also made it easier for President Joe Biden to remove the head of the agency. Biden promptly ousted the agency’s director, Mark Calabria, a Trump appointee who was on a mission to free the mortgage giants from government conservatorship.

Shares of Fannie and Freddie nosedived by more than 40 percent after the ruling, but stocks in the broader mortgage sector — including mortgage originators such as Rocket Companies and LoanDepot — traded slightly higher, according to the Journal.

The reaction may be because investors were not fans of the measures implemented under Calabria to make Fannie and Freddie attractive to private investors when they leave government conservatorship. Those measures led to higher fees for mortgage originations and tighter access to guarantees by the government-sponsored enterprises.

Under Biden, the GSEs’ regulator may try to roll back some of the measures or introduce other initiatives to make mortgages cheaper and more accessible.

Biden’s plans for the entities remain unclear, but any new measures will not spark a boom for mortgage stocks, given rising mortgage rates and the historic housing shortage, Jefferies analyst Ryan Carr told the outlet.

[WSJ] — Akiko Matsuda





    Related Articles

    arrow_forward_ios
    CIM Group’s co-founder Shaul Kuba and Zurich Insurance’s CEO of North America Kristof Terryn with the property at 8820 South Sepulveda (Zurich, Google Maps)
    CIM Group sells apartments near LAX to Swiss investor
    CIM Group sells apartments near LAX to Swiss investor
    Assemblymember Cristina Garcia (Wikipedia, iStock)
    Golf course housing bill dies on the green
    Golf course housing bill dies on the green
    23826 Malibu Road (Redfin)
    Luxe test case as Malibu listing returns to market with 21 percent hike
    Luxe test case as Malibu listing returns to market with 21 percent hike
    Kanye West, Kim Kardashian and an aerial of the property (Getty, Google Maps)
    Kim Kardashian pays extra for Hidden Hills home abutting her, Kanye’s properties
    Kim Kardashian pays extra for Hidden Hills home abutting her, Kanye’s properties
    Whittier Mayor Kimberly Cobos-Cawthorne with layout of Montebello-Commerce Metrolink Statio tiny home village (Facebook, City of Montebello)
    Whittier opens village of tiny homes for homeless residents
    Whittier opens village of tiny homes for homeless residents
    Westmont's Andy Plant and Westmont Village Westmont Living, iStock)
    Senior community nixes industrial development for more residential
    Senior community nixes industrial development for more residential
    A photo illustration of 3620 Ocean Boulevard in Newport Beach's Corona Del Mar enclave (Toby Ponnay, iStock)
    Listing puts Corona del Mar mansion in OC’s $20M+ club
    Listing puts Corona del Mar mansion in OC’s $20M+ club
    FivePoint Holdings' Dan Hedigan (Fivepoints, Ranch on the River)
    FivePoint slashes workforce 29%, posts $37M loss
    FivePoint slashes workforce 29%, posts $37M loss
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...