There have been many stocks that have recorded gains so far this week and one of the more notable ones is that of Federal Home Loan Mortgage Corp (OTCMKTS:FMCC) and Freddie Mac (OTCMKTS:FNMA). The stock has rallied by as much as 10% this week so far following the submission of its annual report to Congress. According to the report from the Federal Housing Finance Agency (FHFA), both the agencies managed to exceed their targets.
2019 Report
It seems the annual report submitted to Congress by FNMA was the main trigger behind the rally in the stock. According to the report, both Fannie Mae and Freddie Mac managed to surpass expectations in 2019 with regards to single-family and multifamily homes.
That being said, it is also necessary to point out that both the companies failed to hit their targets with regard to bulk loan purchases made by financial institutions. The bulk loan purchases are made according to provisions laid down in the ‘Duty to Serve’ stipulation meant for rural areas.
In terms of the targets set by the FHFA, both agencies managed to hit them. However, when it came to purchases made by people in the very low income and low-income groups, Fannie Mae fell short. On the other hand, Freddie Mac was on the market level in terms of purchases from low-income groups.
Analyst View
Dick Bove, who is an analyst at the firm Odeon Capital, has stated for a considerably long been against the idea of buying Fannie Mae and Freddie Mac shares. However, recently, Bove has made favorable noises with regards to the provisions of the housing reforms and stated that it could well be a reason why investors could buy shares in the two agencies.
He stated that due to the new housing reforms both Freddie Mac and Fannie Mae are going to get stronger in 2021. Bove argued that due to the reforms, the housing sector is going to get a significant boost and that, in turn, will lead to the two agencies becoming as strong as they were in the late 1960s.
He drew parallels with the Great Society Program from back in the 1960s which pumped in money into the economy in order to revive the economy.
The Federal Government is doing something similar with regards to fiscal stimulus now following the coronavirus pandemic. Hence, it could eventually lead to the return of the heady days for the two agencies.
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