November 2019: Issuers Give Thanks for Abundant HMBS Harvest

December 5th, 2019

HMBS issuance totaled $732 million in November 2019, as lower rates continued to strengthen new production. 89 pools were issued in November, including about $506 million of new unseasoned HECM first participation pools, easily the highest monthly total for new production this year, and the fourth straight monthly increase. For comparison, HMBS issuers sold 84 pools totaling $522 million in November 2018.

Reverse mortgage lenders weathered a long period of reduced new origination volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of FY2018. Yet, with this month’s issuance, the HMBS market is on track to total about $8 billion for calendar year 2019. HMBS issuance totaled $9.6 billion in 2018, and $10.5 billion in 2017.

November’s production of original new loan pools was about $506 million, compared to $426 million in October, $393 million in September, $390 million in August, $321 million in July, $331 million in June, $325 million in May, $300 million in April, $277 million in March, $274 in February, and $304 million in January. Last month’s tail pool issuances totaled $225 million, within the range of recent tail issuance. As predicted last quarter, we are seeing the benefit of lower interest rates helping new origination volume.

November 2019 issuance divided into 35 First-Participation or Original pools and 54 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 can generate profits for years, helping HMBS issuers during challenging times.

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

HECM Endorsement Analytics – October 2019

November 25th, 2019

HUD’s October 2019 HECM Endorsement Summary Report shows a total of 3,296 endorsements; it is a 36% increase from September’s 2,420 endorsements. Our summary can be found here: NV Endorsement 2019_10.  Other than in February 2019, when the market recovered from the year-end slowdown and reached over 4,000 endorsements, October’s endorsement count is the strongest since May 2018. Part of the increase in volume can be attributed to lower interest rates. Now that interest rate declines have stalled, it remains to be seen if higher endorsement volume will continue.

Based on annual endorsement count, the ranking of the top 15 originators changed only slightly. Most notably, Open Mortgage had 108 endorsements in October. It is the first time Open Mortgage has exceeded 100 endorsements since 2018Q1.

HUD released its September and October Endorsement Snapshot Reports simultaneously. The reports show that Finance of America Reverse sponsored 288 and 273 loans originated by another lender in September and October, respectively, maintaining its lead in this category. American Advisors Group sponsored 200 such loans in October. That’s the highest number American Advisors Group has produced since February 2018. Fairway sold 99 and 103 loans to another sponsor in September and October, still by far the most active seller of HECM closed loans.

HUD’s Snapshot Report breaks down endorsements by type. From 2016 to the beginning of 2018, between 10% and 20% of HECM endorsements were for refinance. From March 2018 until August 2019, that percentage dropped to approximately 5% per month. However, during the last two months, HECM Refinance endorsement count has crept back to more than 10% of total endorsement volume.

New View Advisors released its October update of the Who Buys What From Whom (WBWFW) report. As a reminder, the WBWFW report compiles publicly available Ginnie Mae data to show which HMBS issuers buy HECMs from which lenders. One of the reports displays loans sales by month, by top 100 lender, by HMBS issuer. The October update shows that over the past 12 months, 63% of total origination/securitization volume was sold from originators to HMBS Issuers. Only 37% was originated and securitized by the same company. Of those loans that exchanged hands, 70% were sold by the top 100 sellers, and 20% were sold by the top 2 sellers. The total trade volume from the Top 100 list took a dip in September, with $98 million HECMs originated, sold, and securitized, the lowest total in the last 12 months. August was the high water mark, with over $178 million HECMs originated, sold, and securitized.

HMBS October 2019 Part II: HMBS Float Drops Below $54 Billion

November 11th, 2019

Outstanding HMBS fell by $180 million in October, as continued strong payoffs outweighed a solid issuance month. Payoffs once again totaled just under $1 billion. Total outstanding HMBS fell to $53.9 billion, a three-year low. This is the first month HMBS float has been less than $54 billion since May 2016.

Total HMBS float will likely fall further given current trends. HMBS issuance in the first half of 2019 was the lowest half of issuance in five years. With two months to go, HMBS issuance figures to post the lowest annual total in five years.

We do predict continuing declines in Mandatory Buyouts in the foreseeable future. “Peak Buyout” was an echo of the peak issuance from 2009 through the first half of 2013. Much of this production has already been repurchased by the issuers or repaid by borrowers. From now on, billion-dollar-plus payoff months will be the exception rather than the rule, although this month came close. Many HECM loans continue to reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”), but Peak Buyout appears to have ended.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $536 million, or about 54%, of the payoffs last month. This percentage represents a three year low and continues a gradual 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.

Mr. October Comes Through for Team HMBS

November 1st, 2019

HMBS issuance totaled $642 million in October 2019, as lower rates continued to strengthen new production. 82 pools were issued in October, including about $426 million of new unseasoned HECM first participation pools, the highest monthly total for new production this year, and the fourth straight monthly increase.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of fiscal year 2018. Even with this month’s issuance, the HMBS market will be hard pressed to equal last year’s totals. For the entire year of 2018, HMBS issuance totaled about $9.6 billion, and $10.5 billion in 2017. HMBS issuers sold 99 pools totaling $1.018 billion in October 2018.

October’s production of $426 million of original new loan pools surpasses $393 million in September, $390 million in August, $321 million in July, $331 million in June, $325 million in May, $300 million in April, $277 million in March, $274 in February, and $304 million in January. Last month’s tail pool issuances totaled $216 million, on the low end of the range for recent tail issuance. As predicted, we are likely seeing the benefit of lower interest rates helping new origination volume.

October 2019 issuance divided into 34 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 can generate profits for years, helping HMBS issuers during challenging times.

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

HECM Endorsement Analytics – September 2019

October 16th, 2019

HUD’s September 2019 HECM Endorsement Summary Report released this week shows a total of 2,420 endorsements, 3.4% higher than August’s 2,341 units, our writeup of which can be found here: NV Endorsement 2019_09. There was no change in the endorsement count ranking of the top 15 originators from August. Live Well Financial will fall off the charts in about six months. As previously mentioned, endorsement volume has been fluctuating at about 2,500 units a month since March. Even with the modest production increases aided by falling interest rates, the industry is still on track to endorse just 31,000 HECMs in calendar year 2019, a 26% decrease from 2018 and the lowest level of production since 2003.

For September, New View Advisors is introducing a report we call “WBWFW.” Apart from analyzing HUD’s endorsement data, New View Advisors also compiles publicly available Ginnie Mae data showing which HMBS issuers buy HECMs from which lenders, or Who Buys What From Whom. Unlike endorsement data, which is a lagging indicator and less representative of current market activity, Ginnie Mae data shows HECM unpaid principal balance (UPB) securitized in the current month.

The WBWFW supplement comes in three parts:

  1. Top Originators, a ranking by original HECM UPB of all 1,229 lenders over the last twelve months;
  2. WBWFW, an alphabetical cross-reference between every lender and the HMBS issuer that securitizes its loans; and
  3. 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 can show.

HMBS September 2019 Part II: HMBS Float Falls Again

October 9th, 2019

Outstanding HMBS fell by $182 million in September, as strong payoffs outweighed a decent issuance month. Payoffs once again totaled just under $1 billion. Total outstanding HMBS fell to just over $54.1 billion.

Total HMBS float will likely fall further given current trends. HMBS issuance in the first half of 2019 was the lowest half of issuance in five years.

We predict continuing declines in Mandatory Buyouts in the foreseeable future. “Peak Buyout” was an echo of the peak issuance from 2009 through the first half of 2013. Much of this production has already been repurchased by the issuers or repaid by borrowers. From now on, billion-dollar-plus payoff months will be the exception rather than the rule. Many HECM loans continue to reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”), but Peak Buyout appears to have ended.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA Mandatory Purchases accounted for $561 million, or about 59%, of the payoffs last month. This percentage represents a 21-month low and continues a gradual downward trend from the buyout peak in last year’s third quarter, 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.

2019Q3 HMBS Issuer League Tables – Two Can Play That Game

October 2nd, 2019

AAG remains the frontrunner HMBS issuer for the third quarter of 2019, with $1.38 billion of issuance and 23% market share. Note AAG’s totals are all new originations, with no highly seasoned pools issued. Longbridge took sole possession of second place with $1.29 billion of issuance and a 21.5% share. Longbridge’s rise in the rankings is attributable in large part to a spate of highly seasoned pool issuance during the quarter. RMF previously made similar leaps in the league tables with their seasoned pool issuances. As a result of Longbridge’s surge, RMF was pushed to third with $1.11 billion issued and 18.6% market share, FAR moved down a notch to fourth with $855.2 million issued and 14.3% market share, and PHH Mortgage Corp placed fifth with $665.8 million and 11.1% market share. These five issuers accounted for 88.5% of all issuance, up from 2019Q2’s 83%, and back near the Top-5 concentration high of 91% at year-end 2018. There were 13 active HMBS issuers during the quarter. Live Well Financial is gone, and one-time issuer Synergy One Lending did not issue securities in the quarter.

2019Q3 saw $2.33 billion of HMBS issued, up from both Q2’s $1.98 billion and Q1’s $1.67 billion. For the first nine months, industry volume is off 19% from a year ago. Total HMBS issuance in the first nine months of 2018 was $7.43 billion. Even with highly seasoned pool issuance, expect lower HMBS issuance volume going forward.

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

HMBS September 2019: Back to School Special

October 1st, 2019

HMBS issuance totaled nearly $610 million in September, as lower rates continued to strengthen new production. 83 pools were issued in September, including about $393 million of new unseasoned HECM first participation pools, the highest monthly total for new production this year. For comparison, HMBS issuers sold 104 pools totaling $588 million in September 2018.

However, reverse mortgage lenders still face reduced volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of fiscal year 2018. Even with this month’s issuance, the HMBS market is on pace to issue less than $8 billion in calendar 2019. HMBS issuance totaled $9.6 billion in 2018 and $10.5 billion in 2017.

September’s production of original new loan pools was about $393 million, compared to $390 million in August, $321 million in July, $331 million in June, $325 million in May, $300 million in April, $277 million in March, $274 in February, and $304 million in January. Last month’s tail pool issuances totaled $217 million, on the low end of the range of recent tail issuance. As we predicted two months ago, the industry is likely seeing the benefit of lower interest rates helping new origination volume.

September 2019 issuance divided into 28 First-Participation or Original pools and 55 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 can generate profits for years, helping HMBS issuers during challenging times.

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

HECM Endorsement Analytics – August 2019

September 4th, 2019

HUD’s August 2019 HECM Endorsement Summary Report shows a total of 2,341 endorsements, 15% lower than July’s 2,754 units, a summary of which can be found here: NV Endorsement 2019_08. Monthly endorsement volume has been fluctuating around 2,500 units since March of 2019. If the industry maintains this pace next month, we’ll tally only about 31,000 endorsements for fiscal year 2019, substantially lower than FY2018’s 48,359 units and the 55,332 units from FY2017.

Fairway sold 112 of its originations to another sponsor in August. Over the last 12 months Fairway has originated 951 such loans endorsed by HUD, the leader by far in this sub-market. Finance of America Reverse kept its lead in sponsoring loans originated by another lender. Over the last 12 months, FAR has sponsored 3,426 such loans. Liberty Home Equity Solutions and Reverse Mortgage Funding each sponsored more than 2,000 such loans over the last 12 months.

It is well known that American Advisors Group has a commanding lead in HECM endorsements. Over the past 12 months AAG’s overall monthly market share of endorsements has ranged between 23% and 32%. With loan level endorsement data we can dig deeper into the company’s geographic distribution. The following table shows that with the exception of five states and Puerto Rico, AAG has a 20% or greater market share in every state. For comparison, One Reverse Mortgage and Finance of America Reverse, who hold second and third place based on last-12-month endorsement volume, each have an approximate 8% market share nationwide. Interestingly, AAG has a slightly smaller lead in California where there’s the largest number of HECM endorsements, with an 18% market share. AAG’s dominance in the South and Midwest is substantial, with 64%, 62%, 57% and 57% respectively in West Virginia, South Dakota, Kentucky and North Dakota.

HMBS August 2019: Issuance Does Not Take a Vacation

September 3rd, 2019

HMBS issuance totaled $637 million in August, as lower rates strengthened new production. 93 pools were issued in August, including about $390 million of new unseasoned HECM first participation pools, the highest monthly total for new production this year. There were no highly seasoned pools issued.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of Fiscal Year 2018. For the 2018 calendar year, HMBS issuance totaled about $9.6 billion, compared to $10.5 billion in 2017. Even with this month’s issuance, the HMBS market will be hard pressed to equal last year’s totals. HMBS issuers sold 110 pools totaling $580 million in August 2018.

August’s production of original new loan pools was about $390 million, compared to $321 million in July, $331 million in June, $325 million in May, $300 million in April, $277 million in March, $274 in February, and $304 million in January. Last month’s tail pool issuances totaled $243 million, on the high end of the range of recent tail issuance. As predicted last month, we are seeing the benefit of lower interest rates helping new origination volume.

August 2019 issuance divided into 32 First-Participation or Original pools and 61 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 can generate profits for years, helping HMBS issuers during challenging times.

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