Investors will finally get an opportunity this week to scour earnings reports from Fannie Mae and Freddie Mac for hard evidence of a price war between the two.
Many investors suspect the two mortgage buyers have been granting concessions on their guarantee fees since March, when Freddie Mac cut a deal with Norwest Mortgage to buy most of the big lender's loans. Freddie Mac also signed a pact with Bank of America Mortgage.
Fannie Mae responded with deals with Fleet Mortgage, some smaller lenders and, on Friday, Countrywide Credit Industries. The government- sponsored enterprises have generally granted the lenders flexibility to choose underwriting technology in exchange for the lion's share of their loan sales.
Analysts say the Countrywide deal reestablished Fannie Mae's edge in terms of market share.
One institutional investor who holds stock of both Fannie and Freddie said, "The question I think everyone has is if there is any pricing implication" to the deals.
Jonathan Adams, an analyst at Prudential Securities, said, "I think most investors aren't primarily concerned about a percentage point or two of market share as much as they are concerned about locking in suboptimal pricing."
Depending on the interest rate environment and other market factors, guarantee fees account for up to 25% of the government-sponsored enterprises' earnings, said Thomas O'Donnell, an analyst at Smith Barney, a unit of Citigroup.
Though the government-sponsored enterprises have kept mum on the details of their deals, a spokesman for Countrywide said last week that the guarantee fee was "one of the issues addressed in the agreement."
On Friday, when Countrywide's alliance with Fannie Mae was announced, shares of Fannie, Freddie, and Countrywide all rose amid a stock market rally. Freddie's stock had the biggest gain, rising $2, to $58. Fannie rose $1.625, to $68, while Countrywide rose $1.125, to $44.125.
But the uncertainty about the deals, along with concerns over the creation of a new trade group by mortgage insurers and other financial services companies that oppose expansion by the two government-sponsored enterprises, have reined in Fannie's and Freddie's shares in recent months.
Fannie's second-quarter earnings will be disclosed today, and Freddie's on Thursday.
Mr. O'Donnell said the fear of a price war is likely to subside, now that most of the major lenders have allied with one government-sponsored enterprise or the other.
"I don't think you're going to see a long-term sustained price war, because it's not in anyone's interest."
But investors remain concerned about fluctuations in the guarantee fees stemming from the alliances, Mr. Adams said. On the other hand, he said, the deals show that "both agencies are working diligently to establish more efficient channels with the primary market."
In fact, the deals may turn out to have positive implications for investors, Mr. Adams said. For one thing, he said, both companies could gain volume if loans that were not previously considered eligible for purchase become eligible because of the deals.