There was good news this week for companies "Mae" or "Mac" in their titles -- as their stocks delivered an early Christmas gift to investors.
Fannie Mae (FNMA 2.61%), Freddie Mac (FMCC 4.89%), and Ellie Mae (ELLI +0.00%) have all watched their stocks rise by more than 7% since last Friday. This just marks one week of many this year where both government-sponsored entities (Fannie Mae and Freddie Mac) have had their stocks rise by more than 10% from Friday to Friday.
Ellie Mae
Ellie Mae provides mortgage software solutions to companies, and its software is used in 20% of all mortgage originations in the United States. In a report released on Wednesday, the company did note it saw an increase in refinancing in November, as rates dropped by a quarter of a percent. It also added that it saw loosening credit standards from banks in the mortgage process, but on that day its stock was actually down slightly.
There weren't any dramatic changes from Ellie Mae that would've sent the stock soaring on Monday (when it rose by almost 4.5%) but the company did have its analyst meeting last week, so perhaps someone poured through the materials and decided to buy more. It is also worth mentioning the company watched its P/E multiple plummet from 60 down to 50, so its movement could also be attributable to valuation.
Source: Flickr/401(k) 2013.
Fannie Mae and Freddie Mac
The two government-sponsored entities continued their astounding runs in 2013, as each has watched its stock rise by more than 10 times year to date. The news this week surrounding Fannie Mae and Freddie Mac was largely around the plan from the Federal Housing Finance Agency, or FHFA, to reduce the maximum loan size the two entities can buy from banks and the additional raise in its fees charged beginning next April.
Curiously, the intention behind the FHFA's move was made with "the goal of contracting the market presence of Fannie Mae and Freddie Mac gradually over time," and "invite private capital to reenter the market." That could in turn hurt the business of Fannie Mae and Freddie Mac, however some believe this may ultimately be a sign that the government would one day exit its conservatorship of the two companies.
The big news also came when the two entities announced they would be increasing the fees they charge to mortgage originators to buy loans by 10 basis points. Many suspect this move too is to give private capital further incentive into the mortgage guarantee market that Fannie and Freddie operate in. However that didn't deter investors from pouring into these stocks.
In all, these three companies had the biggest climbs in the financial sector this week, and the investors of both Fannie and Freddie are probably hoping the final full week of 2013 continues in the same way that many this year have, with the stocks on the rise.
