HMBS September 2022: New School Year May Bring Difficult Lessons

October 3rd, 2022

HECM Mortgage-Backed Securities (“HMBS”) issuance fell in September to $966 million, falling for the fifth straight month as higher interest rates continued to take their toll. HMBS issuance remained below $1 billion for only the second time in 18 months.

With nine months in the books and over $11.6 billion issued, HMBS is still on pace to eclipse 2022’s record $13.2 billion issuance total. However, for the foreseeable future higher interest rates will challenge the reverse mortgage market, driving down home price appreciation and the Principal Limit Factors that determine how much HECM originators can lend against those likely-falling home values.

September’s original (first participation) production fell to $744 million, slightly below August’s $749 million, but significantly below July’s $975 million, June’s $1.1 billion, May’s $1.2 billion, and barely half April’s record $1.4 billion in new issuance. September’s original new loan pool production was also much less than that of September 2021, when approximately $1.03 billion in original new HMBS pools were issued.

90 pools were issued in September: 42 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 and FHA mortgage insurance premiums. Last month’s tail pool issuances totaled $222 million, within the typical range.

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

HMBS August 2022 Part II: Refi Retreat Takes a Holiday

September 12th, 2022

HMBS prepayments leveled off in August, as the refinancing wave paused its retreat. August payoffs totaled just over $1 billion, the second lowest amount in 18 months. Outstanding HMBS rose to a record $59.1 billion, helped by a faster roll-up from rising interest rates.

The HECM refinance wave was assisted by a higher HECM lending limit (now $970,800) and surging home prices. Higher interest rates have finally caught up with the HMBS market, driving down principal limit factors (initial loan-to-value ratios) sharply.

In August HMBS paid off at slightly less than a 20% annual rate, versus about 18% in July, but adjusting for day count (23 versus 20 in August and July, respectively), August payoffs were slightly lower.

HMBS prepayment rates are bound to fall further in the remaining four months of 2022. Interest rates resumed their rise, and lenders report that “credit pulls” (indications from credit bureaus that borrowers may refinance), have fallen in recent weeks.

Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled about 34% of the total, another recent monthly high.

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 – August 2022

September 12th, 2022

The New View Advisors and Recursion August 2022 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 08_2022. 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.

HECM Endorsement Analytics – August 2022

September 2nd, 2022

August’s HECM endorsement count bounced back to 5,727 units, up 16% from last month’s 4,928 count. Longbridge Financial endorsed 931 loans, reaching its all-time high and almost tripling volume from one year ago. Market leader American Advisors Group (AAG) had 1,222 endorsements, 19% lower than the approximate 1,500 units it endorsed 12 months ago. AAG, which has had a consistent market share of 30%+ since 2019, in August accounted for only 21% of total endorsement volume. Our full report can be found here: NV Endorsement 2022_08.

HUD’s July Endorsement Snapshot Report was just released on its website. HECM to HECM refis were 38% of all endorsements, a level not seen since Q4 of 2020. The long term average H2H refi share is 20%, so expect to see more refi burnout as the industry (hopefully) returns to its historical mean.

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.

HMBS August 2022: Summer Doldrums Continue

September 1st, 2022

HECM Mortgage-Backed Securities (“HMBS”) issuance dropped in August to $988 million, falling for the fourth straight month as higher interest rates continued to take their toll. HMBS issuance fell below $1 billion for the first time in 17 months.

HMBS issuance totaled $13.2 billion for 2021, easily surpassing the previous record set in 2010. With eight months in the books and over $10 billion issued, HMBS is still on pace to set another new record in 2022.

August’s original (first participation) production fell to $749 million, significantly below July’s $975 million, $1.1 billion in June, $1.2 billion in May and barely half of April’s record $1.4 billion in new issuance. August’s original new loan pool production was also less than that of August 2021, when approximately $880 million in original new HMBS pools were issued.

87 pools were issued in June: 39 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 and FHA mortgage insurance premiums. Last month’s tail pool issuances totaled $239 million, within the typical 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 – July 2022

August 9th, 2022

The New View Advisors and Recursion July 2022 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 07_2022. 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.

HMBS July 2022 Part II: Refi Retreat Continues

August 9th, 2022

HMBS payoffs fell again in July, as the refinancing wave continued its retreat. July payoffs totaled about $1 billion, the lowest amount in 17 months. Outstanding HMBS rose to a record $59 billion due to a combination of fairly strong new issuance, a faster roll-up from rising interest rates and the drop in payoffs.

The HECM refinance wave was assisted by a higher HECM lending limit (now $970,800) and surging home prices. Higher interest rates have finally caught up with the HMBS market, driving down principal limit factors (initial loan-to-value ratios) sharply.

In July HMBS paid off at an 18% annual rate, the first 1-month payoff rate below 20% in over a year, but still above historical averages. HMBS prepayment rates are bound to fall further in the third quarter.

2021 broke all previous records with a $13.2 billion HMBS issuance total. 2021’s record may still fall: over $9.7 billion was issued in the first seven months of 2022.

Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $303 million, 31% of the total, the highest percentage in a year and a half.

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

HECM Endorsement Analytics – July 2022

August 1st, 2022

July saw 4,928 HECMs endorsements, the first time endorsements dropped below 5,000 units since October 2021. Longbridge Financial and Traditional Mortgage Group both had endorsement counts increase 30% over June, but the other lenders all experienced meaningful unit count drops.  Our complete report can be found here:  NV Endorsement 2022_07.

The Santa Ana Homeownership Center saw a 23.8% drop in endorsements, while the other offices experienced drops near 10%. Without exception, all major western field offices, including Los Angeles, Phoenix, Las Vegas, Santa Ana, San Francisco, and San Diego, saw significantly fewer endorsements than June.

HUD’s June Endorsement Snapshot Report was just released on its website. As expected, HECM refi volume declined again, now accounting for less than 42% of all endorsements. Expect this trend to continue, especially with now slowing HPA.

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.

HMBS July 2022: Summer Doldrums

August 1st, 2022

HECM Mortgage-Backed Securities (“HMBS”) issuance fell in July to $1.2 billion, falling for the third straight month as the refinancing wave continued to ebb. Production remains strong by historical standards, but the downward trend is clear.

HMBS issuance totaled $13.2 billion for 2021, easily surpassing the old record from 2010. With seven months in the books and over $9 billion issued, HMBS is still on pace to set another new record in 2022.

July’s original (first participation) production fell to $975 million, compared to $1.1 billion in June, $1.2 billion in May and well below April’s record of $1.4 billion in new issuance. Still, July’s original new loan pool production exceeded that of July last year, when approximately $937 million in original new HMBS pools were issued.

July’s 94 pools broke down into 49 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 $216 million, within the typical 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 – June 2022

July 14th, 2022

The New View Advisors and Recursion June 2022 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 06_2022. 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.