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.

HMBS July 2019 Part II: HMBS Float Rises

August 9th, 2019

Outstanding HMBS rose by nearly $300 million in July, helped by a large new pool backed by highly seasoned Home Equity Conversion Mortgages (“HECMs”). Payoffs once again totaled just under $1 billion. Total outstanding HMBS rose to just under $54.5 billion. Without that one pool, HMBS float would have fallen below $54 billion for the first time in over 3 years.

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

We also 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 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 $610 million, or about 61%, of the payoffs last month. This 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.

HECM Endorsement Analytics – July 2019

August 2nd, 2019

HUD released its July 2019 HECM Endorsement Summary Reports, our summary of which can be found here: NV Endorsement Report 2019_07.  HUD’s report shows a total of 2,754 endorsements, 8% higher than June’s 2,546 units. However, the modest increase is more likely a reflection of 2 additional business days in July rather than any fundamental change in the market. Based on day count, volume is down month over month, from approximately 127 closings per day to 125. Day count is a common analytic in the forward mortgage market. Other than the fluctuation observed at year-end due to the government shutdown, endorsement volume for the last 12 months has shown disappointing stability, and that’s before factoring in interest rates falling almost 1.5% since late 2016.

It was another active month for Fairway as a wholesale originator that sells its loans to other sponsors. This month Fairway originated 98 such loans endorsed by HUD. After falling behind Liberty Home Equity Solution for two months, Finance of America Reverse once again led the companies that sponsored loans originated by another lender, with 340 loans. Liberty Home Equity Solution sponsored 143 such loans, and it was enough to drop Liberty to second place based on annual totals.

As a follow up to last month’s analysis on county-level market penetration, this month we look at the penetration rates of the counties with the largest 60+ populations (the penetration rate is based on number of endorsements from the last 12 months as a percentage of the older-than-60 population).  As a reminder, the top 10 counties have penetration rates ranging from 0.17% to 0.50%. In comparison, many other counties with large number of senior citizens appear to be significantly underserved by the HECM market. The reason can be multifold. For example, New York County’s diminutive penetration level is likely caused by limitations on HECM lending backed by condo and coop properties, while the low rates in other counties likely result from regulatory and legal hurdles, and challenging local social economical dynamics such as housing prices, wealth/poverty levels, etc.

HMBS July 2019: It’s the Time of the Seasoned; Live Well’s Not There

August 1st, 2019

HMBS issuance rose in July 2019 to over $1 billion, helped by a large highly seasoned pool. 83 pools were issued in July, including about $321 million of new unseasoned HECM first participation pools, the third highest monthly total for new production this year. Half of this month’s total issuance, the largest in 15 months, was from one large highly seasoned CMT pool.

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 entire year of 2018, 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, which included some HMBS issuance backed by new HECM loans originated at higher PLFs. HMBS issuers sold 100 pools totaling $545 million in July 2018.

Live Well is no longer the issuer of record for any Ginnie Mae HMBS pools. According to the Ginnie Mae data, RMF acquired the rights to the Live Well pools issued from December 2018 through June 2019. These pools totaled just under $200 million in unpaid balance as of last month. Late last year, RMF acquired over $4 billion in issuer rights, consisting of all outstanding HMBS pools issued by Live Well through November 2018. Pool BN4497 has the distinction of being the last pool issued by Live Well.

July’s production of original new loan pools was about $321 million, compared to $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 $222 million, within the range of recent tail issuance. With rates trending lower, we may be seeing the benefit of lower interest rates helping new origination volume.

July 2019 issuance divided into 28 First-Participation or Original pools and 55 tail pools, exactly the same totals as June. 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.

HMBS June 2019 Part II: HMBS Float Resumes Shrinkage

July 11th, 2019

Outstanding HMBS fell by nearly $200 million in June, as low issuance, high payoffs, and an absence of highly seasoned issues took their toll. Payoffs once again totaled just under $1 billion. Total outstanding HMBS fell to just over $54.2 billion, a three-year low. HMBS float is now $2.2 billion below its peak a year ago.

Total HMBS float will likely fall further given current trends. As we noted earlier this week, HMBS issuance in the first half of 2019 was the lowest half-year 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 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 $600 million, or about 64%, of the payoffs last month. This tracks May’s numbers very closely 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.