FHA allows Fannie Mae, Freddie Mac to approve Rocket Cos.-Mr. Cooper deal

The U.S. Federal Housing Finance Agency allowed government-sponsored enterprises ((GSEs)) Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) to approve Rocket Companies' (NYSE:RKT) proposed acquisition of mortgage servicer Mr. Cooper Group (NASDAQ:COOP).

The FHFA, which oversees the two mortgage giants, said its staff analyzed the proposed merger of two of Fannie (OTCQB:FNMA) and Freddie's (OTCQB:FMCC) largest individual seller-servicer counterparties. "Staff independently recommended that the enterprises approve the combined entity to do business with them so long as Fannie Mae and Freddie Mac each retain strict counterparty concentration risk limits at 20% and impose other appropriate financial and operating safeguards to protect the enterprises and the mortgage market," an FHFA statement said.

The statement emphasized that, to ensure the safety and soundness of the mortgage market, no market participant, i.e., mortgage servicer, should have more than 20% of Fannie or Freddie's servicing market.

Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) don't originate mortgages, but they acquire mortgages and bundle them into securities that are sold, with guarantees that the GSEs will make good on defaults, making the two companies an important source of liquidity in the mortgage market.

In Wednesday afternoon trading, Rocket Companies (NYSE:RKT) stock dropped 3.3%, Mr. Cooper (NASDAQ:COOP) ticked up 0.1%, Fannie Mae (OTCQB:FNMA) increased 3.0%, and Freddie Mac (OTCQB:FMCC) gained 2.0%.