HMBS June 2022: June Too Soon For Swoon, But End to Boon Looms

July 1st, 2022

HECM Mortgage-Backed Securities (“HMBS”) issuance fell in June to $1.3 billion, compared to $1.5 billion in May and April’s record $1.6 billion, as the refinancing wave continues to ebb. However, production remains strong by historical standards.

Given the lag between HECM loan origination and HMBS issuance, the new HECMs backing June’s HMBS pools do not fully reflect the rapid rise in interest rates over the past several months. The numbers for July issuance will likely show further declines.

HMBS issuance totaled $13.2 billion for 2021, smashing the previous record set in 2010. With only six months in the books and over $8 billion issued, HMBS is still on pace to set another new record in 2022.

June’s original (first participation) production fell to $1.1 billion, compared to $1.2 billion in May, and well below April’s record $1.4 billion in new issuance. Still, June’s original new loan pool production was close to March, which totaled $1.13 billion, February’s $1.12 billion and January’s $1.18 billion. Approximately $823 million in original new loan pools were issued a year ago, in June 2021.

100 pools were issued in June: 53 first-participation or original pools, and 47 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 $220 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 – May 2022

June 9th, 2022

The New View Advisors and Recursion May 2022 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 05_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 May 2022 Part II: May Too Soon To Begin Swoon Which May Loom in June

June 9th, 2022

HMBS payoffs continued in May, as the refinancing wave refuses to ebb. Instead, May payoffs totaled $1.48 billion, just short of March’s 2022 record $1.5 billion. Outstanding HMBS rose to a record $58.3 billion with strong new issuance and a faster roll-up from rising interest rates.

HECM borrowers continue to refinance in large numbers, assisted by a higher HECM lending limit (now $970,800) and surging home prices (nearly 20% year-over-year, according to some measures). So far, rising interest rates have failed to calm this reverse mortgage refinancing wave. The nearly $1.5 billion in payoffs in May represents a 24.6% annual payoff rate.

Given the lag between HECM loan origination and HMBS issuance, the new HECMs backing May’s HMBS pools do not fully reflect the rapid rise in interest rates over the past two months. The numbers for June will test the resilience of this refinancing wave, which began with lower interest rates but continued its momentum from the strong home price appreciation and higher FHA lending limits.

2021 smashed all previous records with a $13.2 billion HMBS issuance total. 2021’s record may fall: over $7.1 billion was issued in the first five months of 2022.

Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $283 million, 22% of the total.

As a side note, this is New View Advisors’ 300th blog post since we started sharing analysis and observations about the reverse mortgage industry in 2009.  Your input and comments on any of our findings is always welcome.

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

HECM Endorsement Analytics – May 2022

June 6th, 2022

5,783 HECMs were endorsed in May, continuing a slow downward trend since March’s record-setting 6,510 endorsements. The May endorsement count is off 11.2% from the March high, and down 7.7% from April. The next few months will likely reveal the impact of rising rates and HPA burnout. Our complete report can be found here: NV Endorsement 2022_05.

HUD’s April Endorsement Snapshot Report was just released on its website. As previously noted, H2H Refis and Traditional HECMs have contributed equally to endorsement volume since late 2020. With rates rising and HPA slowing, HECM refinance volume should slow, though another bump to the MCA lending limits in December may well keep the refi party going into 2023. More positive media coverage, such as the recent WSJ article, could also spur a turnaround in consumer sentiment, leading to meaningful organic growth from first-time borrowers.

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 May 2022: May Flowers Wither; June Gloom Looms

June 1st, 2022

HECM Mortgage-Backed Securities (“HMBS”) issuance fell in May to $1.45 billion, down from April’s record $1.6 billion, as the refinancing wave finally began to ebb. However, production remains strong by historical standards.

Given the lag between HECM loan origination and HMBS issuance, new HECMs backing May’s HMBS pools do not fully reflect the rapid rise in interest rates over the past several months. The numbers for June and July issuance will test the resilience of these high levels of HECM loan production, which are sustained by lower interest rates, strong home price appreciation and higher FHA lending limits.

HMBS issuance totaled $13.2 billion for 2021, smashing the previous record set in 2010. With only five months in the books and over $7 billion issued, HMBS is on pace to set another new record in 2022.

May’s original (first participation) production fell to $1.2 billion, well below April’s record of $1.4 billion in new issuance, but exceeding March’s production of original new loan pools totaling $1.13 billion, February’s $1.12 billion and January’s $1.18 billion. Approximately $862 million in original new loan pools were issued a year ago, in May 2021.

103 pools were issued in May: 60 first-participation or original pools, and 43 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 $211 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 – April 2022

May 11th, 2022

The New View Advisors and Recursion April 2022 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 04_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 April 2022 Part II: April May but May June?

May 10th, 2022

HMBS payoffs continued in April, as the refinancing wave diminished slightly but refused to ebb. Instead, April payoffs totaled $1.3 billion, just short of March 2022’s record $1.5 billion. Outstanding HMBS rose to a record $58 billion, with strong new issuance and a faster roll-up from rising interest rates.

HECM borrowers continue to refinance in large numbers, assisted by a higher HECM lending limit (now $970,800) and surging home prices (nearly 20% year-over-year, according to some measures). So far, rising interest rates have failed to calm reverse mortgage refinancings. The $1.3 billion in payoffs in April represents a 24% annual payoff rate.

However, April may be the beginning of the end of H2H refis. Given the lag between HECM loan origination and HMBS issuance, the new HECMs backing April’s HMBS pools do not fully reflect the rapid rise in interest rates over the past two months. The numbers for May and June will test the resilience of this refinancing wave, which began with lower interest rates but continued its momentum from the strong home price appreciation and higher FHA lending limits.

While 2021 surpassed all previous records with $13.2 billion HMBS issued, its record may yet fall: over $5.6 billion was issued in the first four months of 2022.
Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $256 million, 20% of the total.

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

HECM Endorsement Analytics – April 2022

May 3rd, 2022

6,265 HECMs were endorsed in April, showing just a 3.8% drop from March’s record setting month. Geographically, only Denver saw a volume increase, from 1,295 to 1,536 units, while Atlanta, Philadelphia, and Santa Ana all had small decreases. Our complete report can be found here: NV Endorsement 2022_04.

HUD’s March Endorsement Snapshot Report was just released on its website. As expected, HECM loan rates are rising rapidly. Both HECM Refinances and Traditional HECMs contributed to the large increase in endorsement count from February to March. HECM Refis continue to account for roughly half of total endorsement volume.

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:

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

HMBS April 2022: April Showers Bring A New Record, What May Happen Next?

May 2nd, 2022

HECM Mortgage-Backed Securities (“HMBS”) issuers set another new record in April, issuing over $1.6 billion in new HMBS. This shatters the previous mark by nearly $300 million. Refinancing continues to drive this record HMBS volume.

Given the lag between HECM loan origination and HMBS issuance, the new HECMs backing April’s HMBS pools do not fully reflect the rapid rise in interest rates over the past two months. The numbers for May and June issuance will test the resilience of this refinancing wave, which began with lower interest rates but continued its momentum from strong home price appreciation and higher FHA lending limits.

HMBS issuance totaled $13.2 billion for 2021, 22% more than the previous record set in 2010. With only four months in the books and over $5.6 billion issued, HMBS is on pace to set another new record in 2022.

April’s original (first participation) production smashed previous monthly volume records, with $1.4 billion in new issuance. This easily exceeded March’s production of original new loan pools totaling $1.13 billion, February’s $1.12 billion and January’s previous record of $1.18 billion. Approximately $900 million in original new loan pools were issued a year ago, in April 2021. Last April’s total set a record, yet this April exceeds it by half a billion dollars.

113 pools were issued in April: 67 first-participation or original pools, and 46 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 $217 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 – March 2022

April 11th, 2022

The New View Advisors and Recursion March 2022 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 03_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.