Mortgage Originations Jump and Ellie Mae Inc (ELLI) Will Too

The firm recently promoted its own Kevin Watters from overseeing home loan originations to chief executive of mortgage banking, where he will handle any trouble loans. JP Morgan’s mortgage business has been a key revenue driver in light of the low-rate environment.

The firm has also expanded into the rental business, where JP Morgan joined a partnership that invested in thousands of single-family homes in Florida and in the west coast. The venture kind of works like a Real Estate Investment Trust. JP Morgan’s high-net worth clients get to share rental income and sale proceeds while earning returns of 8% per year, according to Bloomberg. Shares of JP Morgan are hovering just below the 52-week high.

Ellie Mae defines itself as a software business, and claims to be a market leader in its niche for mortgage originations. Ellie Mae boasts of 30% market share based on the number of professionals using its software solutions. Of the 8,000 mortgage origination firms in its target market, the company has only captured 1,500 of those customers.

That Ellie Mae is in the software business is reminiscent of the Kayak Software Corp (NASDAQ:KYAK) story. Though Kayak is in the business of combining travel information among hundreds of service providers, founders characterize the company as a technology play. Kayak’s value surrounds its proprietary software solutions and algorithms, which allow it to pull the most relevant data for users. Priceline thought well enough of the offering to acquire Kayak for $1.8 billion in November 2012, a deal that is scheduled to close this quarter.

As for Ellie Mae, the stock seems well positioned to continue to benefit from rising mortgage originations coupled with an increase in demand for an automated solution among mortgage professionals amid heightened regulation in that market.  Whether this will translate to another year of triple-digit gains in Ellie Mae shares or not, however, remains to be seen.

The article Mortgage Originations Jump and This Stock Will Too originally appeared on Fool.com and is written by Gerelyn Terzo.

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