HMBS May 2019 Part II: Seasoned Issuance Props up Float

June 11th, 2019

Outstanding HMBS rose slightly in May, avoiding further decline thanks to some highly seasoned new issuance. Despite just under $1 billion in payoffs, total outstanding HMBS edged up to just over $54.4 billion. This is down over $2 billion from its peak a year ago.

Total HMBS float will likely finally fall further given current trends. As we noted earlier this week, HMBS issuance was just over $855 million in May, including over $282 million from three highly seasoned new issues.

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. Although last month came close, 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 $599 million, or about 62%, of the payoffs last month. This is the first month since December 2017 where mandatory purchases have not exceeded $600 million, 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.

HECM Endorsement Analytics – May 2019

June 3rd, 2019

HUD released its May 2019 HECM Endorsement Summary Reports today, our summary of which can be found here: NVA Endorsement Report 2019_05. There were a total of 2,697 endorsements, in line with average monthly volume since the beginning of 2019. However, year over year, endorsements are running 20% behind last year’s totals.

Regionally, the Santa Ana Center remains the number one office, with significant contributions from the Los Angeles, San Francisco and Santa Ana field offices. The Denver office had the second highest endorsement count in May outside of the Santa Ana Center.

Of the HECMs endorsed in May, AAG originated nearly one third, with 853 endorsements. The #2 lender ORM originated 238 units, less than one third of AAG’s tally. There are just four other originators with an endorsement count market share of 5% or more.

Fairway Independent Mortgage has been the most active wholesale originator, notching 89 HECMs endorsed by HUD. Over the past 12 months, FAR has been the most active sponsor of HECMs originated by another lender, however Liberty Home Equity Solutions had the highest sponsor count in May with 328 HECMs endorsed.

With the strongest treasury rally in ten years, HECM loan rates are heading lower. The 10-year LIBOR benchmark is at its lowest point since September 2017. Yet, HECM refinance activity remains low. Given the lower PLFs enacted as of FY 2018, it seems unlikely we will see another refinance boom like the one experienced in 2017.

Please contact us if you’re interested in subscribing, or learning more about our expanded endorsement data services.

HMBS: In the Month of May, “Gotta Find Me a Future, Move Out of My Way”

June 3rd, 2019

The future of reverse mortgage capital markets provided the theme of last month’s NRMLA Investors Conference in New York. In the month of May, HMBS issuers provided a glimpse of the future, with the first HMBS platinum pools, continued stagnation in the original pool market, and more highly seasoned issuance from the melting iceberg of (very) old whole loans.

HMBS issuance rose in May 2019 to just over $855 million. If not for three highly seasoned pools that bumped up issuance volume by over $282 million, May issuance would have been consistent with the low issuance of recent months. 94 pools were issued in May, including about $325 million of new unseasoned HECM first participation pools. HMBS float shrinkage will probably hold steady at about $54.5 billion if May’s payoffs are in line with recent months.

Ginnie Mae launched its HMBS Platinum Program on April 10th. Market participants can now aggregate Ginnie Mae II HMBS pools into Platinum pools. Like the underlying HMBS, these new pools will be segregated based on collateral type. As of today, no HMBS Platinum pool has been issued.

Live Well Financial issued 6 HMBS pools in May totaling about $23 million. Live Well recently ceased originating new loans.

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 calendar year of 2018, HMBS issuance totaled about $9.6 billion, compared to $10.5 billion in 2017. 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. For comparison, HMBS issuers sold 113 pools totaling $579 million in May 2018.

Production of original new loan pools was about $325 million in May, compared to $300 million in April, $277 million in March, $274 in February, and $304 million in January. Last month’s tail pool issuances totaled $247 million, within the range of recent tail issuance. For the past few months, the new issuance market has settled into Groundhog Day mode, with very similar volume statistics other than the occasional seasoned first participation issue.

May 2019 issuance divided into 36 First-Participation or Original pools, and 58 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.

April 2019 Part II: March Backwards continues in April – Payoffs Drive Down HMBS Float

May 9th, 2019

HMBS float fell again in April as a big payoff total continued to outweigh issuance. With over $985 million in payoffs and a continued drought of new issuance, total outstanding HMBS ended the month just over $54.3 billion, down over $2 billion from its peak a year ago. HMBS float had been range-bound between just under $55 billion to $57 billion for over two years. The current float is the lowest since July 2016.

Total HMBS float will likely finally fall further given current trends. As we noted earlier this week, HMBS issuance was just under $567 million in April, with a few highly seasoned new issues.

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. Although April came close, billion-dollar-plus payoff months will be the exception rather than the rule. Many 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 $627 million, or about 63%, 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.

HMBS April 2019: Silent Spring

May 7th, 2019

HMBS issuance held steady in April 2019 at just over $567 million.  April issuance was consistent with the sharply lower issuance of recent months, despite a few highly seasoned pools that bumped up issuance volume.  86 pools were issued in April, including about $300 million of new first participation pools. For comparison, HMBS issuers sold 120 pools totaling $1.2 billion in April 2018.  HMBS float shrinkage will continue as April’s payoffs are almost certain to outweigh new issuance and interest roll-up.

Live Well Financial issued 9 HMBS pools in April totaling about $32 million. Since selling off its HMBS book to RMF last year, Live Well has issued over $160 million in HMBS pools.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of FY2018.  For calendar year 2018, HMBS issuance totaled $9.6 billion, compared to $10.5 billion in 2017.  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.

For 2019, the new issuance market has settled into Groundhog Day mode, with very similar volume statistics other than the occasional seasoned first participation issue: $300 million in April, $277 million in March, $274 in February, and $304 million in January.  April’s tail pool issuances totaled $221 million, within the range of recent tail issuance.

April 2019 issuance divided into 36 original pools and 50 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 – April 2019

May 1st, 2019

New View Advisors’ April 2019 HECM endorsement analytics is posted: NVA Endorsement Report 2019_04. Each month, HUD releases HECM endorsement data to the public, links to which are provided in the report’s summary. New View Advisors’ reports compile HUD’s data into user-friendly and more informative formatting. Customized reports for client-specific needs are also available upon request.

Please contact us if you’re interested in subscribing, or learning more about our expanded endorsement data services.

HMBS March 2019 Part II: March Backwards – Big Payoffs Drive Down HMBS Float

April 9th, 2019

HMBS float fell again in March as a big payoff total continued to outweigh issuance. With over $950 million in payoffs and a continued drought of new issuance, total outstanding HMBS ended the month just under $54.6 billion, down about $200 million from February. HMBS float had been range-bound between just under $55 billion to $57 billion for over two years. The current float is the lowest since August 2016.

Total HMBS float will likely fall further given current trends. As we noted last week, HMBS issuance was only about $557 million in March, with one highly seasoned new issue.

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. Although March came close, billion-dollar-plus payoff months will be the exception rather than the rule. Many 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 $616 million, or about 63%, 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 these results from publicly available Ginnie Mae data as well as private sources.

2019Q1 HMBS Issuer League Tables – Look Who’s Back

April 8th, 2019

After a full year away from #1, AAG recaptured the lead HMBS issuer slot for the first quarter of 2019, with $391 million of issuance for a 23.5% market share.  RMF was second, with $323.5 million issued and 19.5% market share, and FAR remained in third with $244 million issued and 14.7% market share.  Ocwen Loan Servicing and Nationstar round out the top five issuers.  Ocwen issued $210.6 million for a 12.7% market share, and Nationstar was fifth with $142.7 million and 8.6% market share.  These five issuers accounted for approximately 79% of all issuance, down from 2018’s record 92%. There were 15 active HMBS issuers during the quarter, including first-time issuer Synergy One Lending, now owned by Mutual of Omaha.

2019Q1 saw only $1.67 billion of HMBS issued, a 44% decline from one year ago, and an almost five-year quarterly low.  For comparison, total HMBS issuance volume in the first quarter of 2018 equaled $2.97 billion.  As previously noted, unless highly seasoned pool issuance makes a meaningful and lasting return, expect lower HMBS issuance volume going forward.

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

New View Advisors HECM Endorsement Analytics

April 8th, 2019

New View Advisors is launching its monthly HECM endorsement report as part of our growing suite of products in the reverse mortgage industry.  Each month, HUD releases HECM endorsement data to the public, links to which we have provided in the report’s summary.  New View Advisors’ reports compile HUD’s data into user-friendly and more informative formatting.  Customized reports for client-specific needs are also available upon request.

The March 2019 report can be found here: New View Advisors Endorsement Report March 2019

Please contact us if you’re interested in subscribing, or learning more about our expanded endorsement data services.

March 2019 HMBS Issuance: Groundhog Day in March

April 3rd, 2019

HMBS issuance held steady in March 2019 at just under $558 million. March issuance was consistent with the sharply lower issuance of recent months, despite one highly seasoned pool that bumped up volume. 88 pools were issued in March, including about $277 million of new first participation pools. HMBS float shrinkage will continue as March’s payoffs are almost certain to outweigh new issuance and interest roll-up.

HMBS issuers brought just under $1.7 billion to market in the first quarter of 2019. This is the lowest quarter of HMBS issuance since the third quarter of 2014. 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. 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.

Production of original new loan pools was consistent with the $274 million issued in February, $304 million in January and $277 million in December, but well below the $360 million in September 2018. Last month’s tail pool issuances totaled $220 million, within the range of recent tail issuance. For the past few months, the new issuance market has settled into Groundhog Day mode, with very similar volume statistics other than the occasional seasoned first participation issue. For comparison, HMBS issuers sold 115 pools totaling $626 million in March 2018.

March 2019 issuance divided into 33 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.