New View Advisors and Recursion Reverse Mortgage Prepayment Indices – April 2021

May 12th, 2021

New View Advisors and Recursion April 2021 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 04_2021. The indices are derived from underlying HECM data in HMBS made public by Ginnie Mae, as well as private sources. This new expanded set of prepayment data is calculated using dollar principal balance, not unit count.

The enhanced data set shows current trends in prepayment activity by product type and Principal Limit Factors (PLFs), and for current 12-month LIBOR PLFs by Expected Rate. HECM loans with higher Expected Rates originated in the year or so prior to the precipitous fall in interest rates brought on by the pandemic are experiencing higher prepayment rates. Therefore, we segregate indices for recent production 12-month LIBOR PLFs into Expected Rates greater than 4% and Expected Rates less than or equal to 4%.

Prepayment speeds are expressed as annualized percentages in three categories: Total Payoffs, Payoffs Other Than Assignments, and Payoffs from Assignment. For each category, we calculate the 1-month, 3-month, 6-month and 12-month CPR, or annual rate of prepayment.

For HMBS pools backed by adjustable rate HECMs using the Constant Maturity Treasury (CMT) index, prepayment speeds will continue to populate as more of these HMBS are issued.

Please contact us if you’re interested in customized stratification of HECM prepayment speeds by vintage, Expected Rate, Weighted Average Loan Age, or other tailored output.

HMBS April 2021 Part II: The Big Payoff Continues

May 11th, 2021

Outstanding HMBS rose by about $100 million in April, as payoffs and issuance remained high. Payoffs totaled nearly $1.1 billion, the 3rd highest monthly total ever. Total outstanding HMBS is now nearly $56.4 billion. The big payoff reflects continued high levels of refinancing.

February was the last month in which GNMA allowed issuance of HMBS pools backed by first participations of LIBOR-indexed loans. For the time being, the Treasury CMT index replaces LIBOR as the base index for newly originated adjustable-rate HECM loans.

In 2019, HMBS posted its lowest annual issuance total in five years. But in 2020, low interest rates and a higher lending limit boosted production to a near-record $10.6 billion. That record may fall; so far this year, HMBS new issuance already totals almost $3.8 billion.

“Peak Buyout” was an echo of the peak issuance from 2009 through the first half of 2013. Most of this production has already been repurchased by the issuers or repaid by borrowers. Each month fewer and fewer of these peak issuance loans remain, and with lower interest rates loans take longer to roll up to their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”). Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $220 million. This continues the downward trend from the buyout peak in the third quarter of 2018, which averaged over $750 million in Mandatory Purchases per month.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

HECM Endorsement Analytics – April 2021

May 7th, 2021

4,187 HECM loans were endorsed in April, less than a percent lower than last month’s 4,220 units.  The top three lenders combined saw 213 fewer endorsements than March, while smaller lenders’ endorsement counts rose, making up most of the difference.  By region, only Denver saw an increase, with 117 endorsements more than March.  Every other region experienced a decrease in endorsement volume.  Our report can be found here: NV Endorsement 2021_04

HUD’s March Endorsement Snapshot Report is now available on HUD’s website.  South River Mortgage, based in MD, has emerged as a leading wholesale originator.  Founded in 2019, the company originated only a handful of HECMs until 2020 but has originated 100+ loans each month in 2021.  Over the past 12 months, South River posted 800 HECM endorsements sponsored by another party, second only to Fairway Independent Mortgage Corporation.

New View Advisors continues to offer its Who Buys What From Whom (WBWFW) report as part of our endorsement report subscription.  The report compiles publicly available Ginnie Mae dollar volume data to show which HMBS issuers buy HECMs from which lenders.  The WBWFW report includes:

Top Originators – a ranking by original HECM UPB of all lenders over the last twelve months

WBWFW – an alphabetical cross-reference between every lender and the HMBS issuer that securitizes its loans

Top 100 Trends – a breakdown of loan sales by month, by Top-100 lender, by HMBS issuer.

Edited samples from this month’s WBWFW report are at the end of our endorsement writeup. These reports together provide accurate insight for sales and marketing teams to learn just who’s buying what from whom. The dataset is more complete and timely than what endorsement analysis alone can show.

HMBS April 2021: April Showers of HMBS

May 3rd, 2021

HMBS issuers posted a very strong April with nearly $1.1 billion in new issuance, the second month of the post-LIBOR era. February 2021 was the last month in which Ginnie Mae allowed pooling of new HMBS pools backed by first participations of LIBOR-based HECMs. The Constant Maturity Treasury “CMT” index is now the only index for new adjustable rate HECM loans and will remain so until a transition to another index, likely “SOFR,” the Secured Overnight Financing Rate. 104 pools were issued in April, including 47 first-participation CMT pools. Before January 2021 no new first-participation CMT pools had been issued in many years.

A record $10.6 billion in HMBS was issued in 2020, easily beating 2019’s total of $8.3 billion and 2018’s $9.6 billion. 2010 remains the all-time HMBS volume year with $10.8 billion issued, when Principal Limits were high and no borrower financial assessment safeguards had been established. That volume record may be challenged in 2021 if interest rates stay low.

April production of original new loan pools was a record $900 million, compared to March’s $671 million, February’s $693 million, January’s $552 million, December’s previous record of $878 million, and November’s $765 million. Approximately $470 million in original new loan pools were issued in April 2020.

April issuance divided into 59 first-participation or original pools and 45 tail pools. Original pools are those HMBS pools backed by first participations in previously uncertificated HECM loans. Tail HMBS issuances are HMBS pools consisting of subsequent participations. Tails are not from new loans, but they do represent new amounts lent. Tail HMBS issuance is essential for HMBS issuers to finance their monthly advances, such as borrower draws and FHA mortgage insurance premiums. Last month’s tail pool issuances totaled $194 million, slightly below the typical $200-$250 million range.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

New View Advisors and Recursion Reverse Mortgage Prepayment Indices – March 2021

April 12th, 2021

New View Advisors and Recursion March 2021 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 03_2021. The indices are derived from underlying HECM data in HMBS made public by Ginnie Mae, as well as private sources. This new expanded set of prepayment data is calculated using dollar principal balance, not unit count.

The enhanced data set shows current trends in prepayment activity by product type and Principal Limit Factors (PLFs), and for current 12-month LIBOR PLFs by Expected Rate. HECM loans with higher Expected Rates originated in the year or so prior to the precipitous fall in interest rates brought on by the pandemic are experiencing higher prepayment rates. Therefore, we segregate indices for recent production 12-month LIBOR PLFs into Expected Rates greater than 4% and Expected Rates less than or equal to 4%.

Prepayment speeds are expressed as annualized percentages in three categories: Total Payoffs, Payoffs Other Than Assignments, and Payoffs from Assignment. For each category, we calculate the 1-month, 3-month, 6-month and 12-month CPR, or annual rate of prepayment.

For HMBS pools backed by adjustable rate HECMs using the Constant Maturity Treasury (CMT) index, prepayment speeds will begin to populate as more of these HMBS are issued. Just under $300 million of CMT HMBS are currently outstanding: other than some highly seasoned tail pools, none have been outstanding more than one month.

Please contact us if you’re interested in customized stratification of HECM prepayment speeds by vintage, Expected Rate, Weighted Average Loan Age, or other tailored output.

HMBS March 2021 Part II: The Big Payoff

April 9th, 2021

Outstanding HMBS fell by about $110 million in March 2021, as payoffs spiked and issuance eased somewhat. Payoffs rose to nearly $1.1 billion, the 7th highest monthly total ever. Total outstanding HMBS is now nearly $56.3 billion. The big payoff reflects continued high levels of refinancing.

February was the last month in which GNMA allowed issuance of HMBS pools backed by first participations of LIBOR-indexed loans. For the time being, the Treasury CMT index replaces LIBOR as the base index for newly originated adjustable-rate HECM loans.

In 2019, HMBS posted its lowest annual issuance total in five years. But in 2020 low interest rates and a higher lending limit boosted production significantly to a near-record $10.6 billion. In 2021, the industry may struggle to reach the same levels of production, challenged by higher interest rates. However, new issuance in the first quarter was fairly strong at nearly $2.7 billion.

“Peak Buyout” was an echo of the peak issuance from 2009 through the first half of 2013. Most of this production has already been repurchased by the issuers or repaid by borrowers. Each month fewer and fewer of these peak issuance loans remain, and with lower interest rates loans take longer to roll up to their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”). Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $207 million, the lowest total in nearly seven years. This continues the downward trend from the buyout peak in the third quarter of 2018, which averaged over $750 million in Mandatory Purchases per month.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

HECM Endorsement Analytics – March 2021

April 5th, 2021

March HECM Endorsements came in at 4,220 units. Over the past year, HECM endorsement activity has been fairly stable, averaging slightly below 4,000 endorsements each month. Our analysis can be found here:  NV Endorsement 2020_03.  The top eight originators now account for 79% of endorsement volume. American Advisors Group has approximately one third of the market, followed by Finance of America Reverse and Reverse Mortgage Funding, each accounting for approximately 10% of endorsement count volume.

HUD’s February Endorsement Snapshot Report is also now available on HUD’s website. HECM to HECM refis dropped slightly, to 1,434 endorsements from January’s record high 1,651 endorsements. 10-year treasury rates continued to climb in March, however HECM endorsement volume does not yet reflect any impact from rising interest rates.

New View Advisors continues to offer its Who Buys What From Whom (WBWFW) report as part of our endorsement report subscription. The report compiles publicly available Ginnie Mae data to show which HMBS issuers buy HECMs from which lenders. The WBWFW report includes:

♦Top Originators – a ranking by original HECM UPB of all lenders over the last twelve months
♦WBWFW – an alphabetical cross-reference between every lender and the HMBS issuer that securitizes its loans
♦Top 100 Trends – a breakdown of loan sales by month, by Top-100 lender, by HMBS issuer.

Edited samples from this month’s WBWFW report are at the end of our endorsement writeup. These reports together provide accurate insight for sales and marketing teams to learn just who’s buying what from whom. The dataset is more complete and timely than what endorsement analysis alone can show.

New View Advisors and Recursion Reverse Mortgage Prepayment Indices – February 2021

April 5th, 2021

New View Advisors and Recursion February 2021 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 02_2021. The indices are derived from underlying HECM data in HMBS made public by Ginnie Mae, as well as private sources. This new expanded set of prepayment data is calculated using dollar principal balance, not unit count.

The enhanced data set shows current trends in prepayment activity by product type and Principal Limit Factors (PLFs), and for current 12-month LIBOR PLFs by Expected Rate. HECM loans with higher Expected Rates originated in the year or so prior to the precipitous fall in interest rates brought on by the pandemic are experiencing higher prepayment rates. Therefore, we segregate indices for recent production 12-month LIBOR PLFs into Expected Rates greater than 4% and Expected Rates less than or equal to 4%.

Prepayment speeds are expressed as annualized percentages in three categories: Total Payoffs, Payoffs Other Than Assignments, and Payoffs from Assignment. For each category, we calculate the 1-month, 3-month, 6-month and 12-month CPR, or annual rate of prepayment.

For HMBS pools backed by adjustable rate HECMs using the Constant Maturity Treasury (CMT) index, prepayment speeds will begin to populate as more of these HMBS are issued. Just under $300 million of CMT HMBS are currently outstanding: other than some highly seasoned tail pools, none have been outstanding more than one month.

Please contact us if you’re interested in customized stratification of HECM prepayment speeds by vintage, Expected Rate, Weighted Average Loan Age, or other tailored output.

2021Q1 HMBS Issuer League Tables – “Top Five” Account for 94% of all Issuance

April 5th, 2021

AAG maintained its #1 HMBS issuer ranking for the first quarter of 2021 with $704.6 million of issuance and 26.3% market share. FAR held on to second with $544.2 million issued and 20.3% market share. Longbridge was third, again just behind FAR, with $541.2 million issued and 20.2% market share, and RMF was fourth with $442.7 million issued and 16.5% market share. PHH Mortgage rounded out the Top Five again, with $287.8 million and a 10.7% market share. These five issuers accounted for more than 94% of all HMBS issuance in the quarter, consistent with past performance. There were 14 active HMBS issuers in 2021Q1, one more than last year, with Mutual of Omaha returning to market and issuing two pools.

2021Q1 saw $2.68 billion of HMBS issued, slightly off last quarter’s $3.04 billion but up 28% from 2020’s first quarter $2.09 billion tally. While the quarter’s run rate would put the industry annual total over $10 billion, higher interest rates may challenge volume in the later months of 2021.

New View Advisors compiled these rankings from publicly available Ginnie Mae data as well as private sources.

HMBS March 2021; HECM MMI Fund: As Predicted

April 1st, 2021

HMBS issuance remained fairly strong at $858 million in March 2021, the first month of the post-LIBOR era. February 2021 was the last month in which Ginnie Mae allowed pooling of new HMBS pools backed by first participations of LIBOR-based HECMs. The Constant Maturity Treasury “CMT” index is now the only index for new adjustable rate HECM loans and will remain so until a transition to another index, likely the Secured Overnight Financing Rate, or “SOFR.” 91 pools were issued in March, including 35 first-participation CMT pools. Before January 2021 no new first-participation CMT pools had been issued in many years.

Earlier this week, the HECM industry received good news that FHA’s MMI Fund now shows a surplus of 2.39% for the HECM portion of the Fund. This report comes only four months after FHA claimed the HECM program was a drag on its mortgage insurance program and was being “subsidized” by their forward mortgage program. New View Advisors was skeptical of this pessimistic view and made our case December 7, 2020: https://www.newviewadvisors.com/commentary/forward-mortgage-does-not-subsidize-reverse-mortgage/. We predicted FHA would soon show a significant HECM surplus, and that has already come to pass. FHA should now be under less pressure to take measures to reduce HECM risk, program changes that could have taken the form of higher Mortgage Insurance Premiums (MIP) or lower lending limits.

A record $10.6 billion in HMBS was issued in 2020, easily beating 2019’s total of $8.3 billion and 2018’s $9.6 billion. HMBS issuance in the first quarter of 2021 totaled about $2.7 billion, but issuers may find it difficult to maintain this pace in the face of rising interest rates.

March production of original new loan pools was $671 million, compared to February’s $693 million, January’s $552 million, December’s record $878 million, and November’s $765 million. Approximately $455 million in original new loan pools were issued in March 2020.

March issuance divided into 43 first-participation or original pools, and 48 tail pools. Original pools are those HMBS pools backed by first participations in previously uncertificated HECM loans. Tail HMBS issuances are HMBS pools consisting of subsequent participations. Tails are not from new loans, but they do represent new amounts lent. Tail HMBS issuance is essential for HMBS issuers to finance their monthly advances, such as borrower draws, FHA mortgage insurance premiums, etc. Last month’s tail pool issuances totaled $187 million, below the typical $200-$250 million range.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.