These Mortgage Stocks Can Benefit From Fannie, Freddie Ruling

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Rocket Cos and LoanDepot rallied, while Fannie Mae and Freddie Mac fell following a Supreme Court ruling (Unsplash)

Rocket Cos and LoanDepot rallied, while Fannie Mae and Freddie Mac fell following a Supreme Court ruling (Unsplash)

Fannie Mae and Freddie Mac stocks fell after a recent Supreme Court ruling, but some major mortgage players may ultimately benefit from the ruling, according to the Wall Street Journal.

In a ruling last week, the Supreme Court refused to dissolve the Federal Housing Finance Agency, which was created after 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 removed the agency’s director. Mark Calabria, Trump’s appointee who was on a mission to free mortgage giants from government custody.

Fannie and Freddie’s shares fell more than 40 percent after the decision, according to the magazine, but shares in the broader mortgage sector, including the likes of Rocket Companies and LoanDepot, traded slightly higher.

The backlash could be that investors were not supporters of the measures Calabria put in place to make Fannie and Freddie attractive to private investors when they leave government custody. These measures have resulted in higher mortgage lending fees and limited access to guarantees from government-funded enterprises.

Under Biden, the GSE regulator may try to reverse some measures or introduce other initiatives to make mortgages cheaper and more affordable.

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

[WSJ] – Akiko Matsuda

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