Archive for the ‘HREMIC’ Category

HREMIC Issuance 2015 First Half – Nomura Eclipses BAML for #1

Wednesday, July 1st, 2015

HREMIC issuance for the first six months of 2015 was $4.27 billion, 85% of 2014’s full year $5.05 billion.  There were 15 transactions underwritten by three sponsors, Nomura, Bank of America Merrill Lynch, and Credit Suisse. Nomura captured the #1 slot for the first half, ending Bank of America Merrill Lynch’s nearly 6-year reign as #1 by just $16 million in the half.  Nonetheless, life-to-date BAML has issued 45% of all HREMICs, while Nomura has issued 9% life-to-date.  Credit Suisse was the third underwriter with 6 issuances totaling $1.33 billion.  Credit Suisse has issued a little less than 6% of all HREMICs life-to-date.

Issuance in 2015 is on pace to smash through 2012’s record $6 billion of HREMIC issuance.  BAML’s $730 million 2015-H13 transaction was the largest HREMIC ever issued.  Approximately 57% of all HMBS have now been resecuritized into HREMICs.  While there have been a total of 14 different HREMIC issuers since 2009, with RBS dropping out of the business, this is the first time just 3 dealers represented 100% of HREMIC issuance.

HREMIC collateral consists of HMBS, which are Ginnie Mae guaranteed pass-through securities.  HMBS are backed by pools of participations of HECMs, which are FHA-insured reverse mortgages.  This double layer of government guarantee, combined with the relatively high coupon and favorable prepayment patterns of the underlying loans, results in very favorable execution, even when compared to other Ginnie Mae “forward mortgage” securities.

New View Advisors compiled these rankings from publicly available Ginnie Mae data.

HREMIC Issuance – 2014 Full Year

Tuesday, January 6th, 2015

HREMIC issuance ended 2014 at $5.05 billion, with 25 transactions underwritten by 5 different sponsors. Bank of America Merrill Lynch remains the market leader with a 39% market share, issuing $1.96 billion of HREMICs. Life to date, BAML has issued 47% of all HREMICs. RBS was second with 6 issuances totaling $1.46 billion, and Nomura was third with 5 transactions for $856 million.

Issuance in 2014 reached the third highest annual volume after 2012 and 2010. Volume surpassed 2013 totals by just under $100 million but was far off the record year in 2012 when $6 billion was issued. Stifel issued $472 million in 2014, but none in the second half. Credit Suisse is a new HREMIC issuer as of November 2014, with one transaction issued for $295 million.

HREMIC collateral consists of HMBS, which are Ginnie Mae guaranteed pass-through securities. HMBS are backed by pools of participations of HECMs, which are FHA-insured reverse mortgages. This double layer of government guarantee, combined with the relatively high coupon and favorable prepayment patterns of the underlying loans, results in very favorable execution, even when compared to other Ginnie Mae “forward mortgage” securities.

New View Advisors compiled these rankings from publicly available Ginnie Mae data.

HREMIC 2014 First 9 Months – Where Have All the Sponsors Gone?

Wednesday, October 1st, 2014

HREMIC issuance for the first 9 months of 2014 was $3.75 billion, with 19 transactions underwritten by 4 different sponsors.  Bank of America Merrill Lynch remains the market leader with a 44% market share, issuing a little over $1.6 billion of HREMICs, $630.3 million of which was in the third quarter.  RBS was second with 4 issuances totaling $932.6 million, and Nomura was third with 4 transactions for $693.3 million.  Nomura issued $557.9 million of HREMICs in the third quarter; Stifel issued none.

Issuance remains on pace with 2013, but the bigger story is fewer sponsors. BAML and Nomura were responsible for 86% of third quarter activity, with RBS issuing just one HREMIC for $190.8 million.  Cantor Fitzgerald last issued HREMICs in 2011, Deutsche Bank in 2012, and Barclays in 2013.  With Stifel’s likely departure from reverse mortgages last month, and Knight Capital’s exit last year, the industry is down to just three HREMIC sponsors, BAML, Nomura, and RBS.

HREMIC collateral consists of HMBS, which are Ginnie Mae guaranteed pass-through securities.  HMBS are backed by pools of participations of HECMs, which are FHA-insured reverse mortgages.  This double layer of government guarantee, combined with the relatively high coupon and favorable prepayment patterns of the underlying loans, results in very favorable execution, even when compared to other Ginnie Mae “forward mortgage” securities.

New View Advisors compiled these rankings from publicly available Ginnie Mae data.

HREMIC Prepayment Data – August 2014

Monday, September 22nd, 2014

The August 2014 reporting period data for HREMIC prepayment speeds can be found here.  The securities are listed in chronological order, by class, and prepayment speeds use the Dollar Amount Method, defined previously.

HREMIC collateral consists of HMBS, which are Ginnie Mae guaranteed pass-through securities backed by pools of participations of HECMs, which are FHA-insured reverse mortgages.

New View Advisors compiled this data using publicly available Ginnie Mae sources.

Customized reports are available by subscription.

HREMIC Prepayment Data – June 2014

Wednesday, June 25th, 2014

The June 2014 reporting period data for HREMIC prepayment speeds can be found here.  The securities are listed in chronological order, by class, and prepayment speeds use the Dollar Amount Method, defined previously.  Customized reports are available by subscription.

Life-to-date there have been 121 HREMICs issued by 13 different underwriters for $22.1 billion.  Nearly 46% of all HMBS outstanding are collateral for these HREMIC securities.

New View Advisors compiled this data using publicly available Ginnie Mae sources.

New View Advisors Introduces HREMIC Prepayment Data

Wednesday, June 4th, 2014

Starting with the May 2014 reporting period, New View Advisors is introducing monthly distribution of prepayment data for HREMIC securities. The securities are listed in chronological order, by class, and prepayment speeds use the Dollar Amount Method.

The Dollar Amount Method measures prepayment rates by the dollar amount repaid rather than the number of loans or participations that pay off in a given period.  Each HREMIC security corresponds to a group of one or more HMBS pools, or fractions thereof.  The prepayment speed of each HREMIC security is equal to the weighted average of the prepayment speeds of these underlying HMBS, weighted by the unpaid balance of each HMBS pool.

Through May 2014, more than $21.5 billion of HREMICs have been issued. The report can be found here.

In addition to Series, Group, and Class, other data fields include Original Principal Balance, Current Principal Balance, Security Factor, 1, 3, 6, and 12-month Constant Prepayment Rates, Current Interest Rate, Principal Type, Bond Class Interest Type, CUSIP, Final Distribution Date, Underlying Collateral Type, and Underlying Collateral WAPA (Weighted Average Participation Age).

Customized reports are available by subscription.

HREMIC collateral consists of HMBS, which are Ginnie Mae guaranteed pass-through securities backed by pools of participations of HECMs, which are FHA-insured reverse mortgages.

New View Advisors compiled this data using publicly available Ginnie Mae sources.

 

HREMIC 2014Q1 Issuance

Friday, April 11th, 2014

HREMIC issuance for the first quarter of 2014 was off 41% from the first quarter of 2013, with just 6 transactions totaling $957 million.   Only 1 HREMIC was issued in March. In the first quarter of 2013, 8 transactions totaling $1.66 billion were issued.

Bank of America Merrill Lynch continues its dominance in the space with a 56% market share, issuing $538.4 million of HREMICs.  Stifel was second with 2 issuances totaling $300.8 million, and RBS had one transaction for $118.2 million.

HREMIC collateral consists of HMBS, which are Ginnie Mae guaranteed pass-through securities.  HMBS are backed by pools of participations of HECMs, which are FHA-insured reverse mortgages.  This double layer of government guarantee, combined with the relatively high coupon and favorable prepayment patterns of the underlying loans, results in very favorable execution, even when compared to other Ginnie Mae “forward mortgage” securities.

New View Advisors compiled these rankings from publicly available Ginnie Mae data.

HMBS 2013: RMS Leads the Pack; Tails Wag the Dog

Monday, January 13th, 2014

HMBS issuance increased for the first time in three years, tracking the slightly higher originations of 2013 and an increase in “Tail” securitizations. HMBS pools totaling nearly $9.6 billion were issued in 2013, up from $8.5 billion last year but 10% below 2010’s record $10.7 billion. However, the 1,023 issues shattered the previous record of 628 set last year. HMBS issuers sold nearly 400 “tail” pools in 2013. These tails are participations in previously securitized HECMs, and are created by excess interest and “Additional Amounts,” such as line of credit draws and Mortgage Insurance Premiums (“MIP”).

For a reverse mortgage industry beset by financial and political pressures, the annuity-like profits from tail issuance are a stabilizing and beneficial feature during these dog days. Tail issuance can be profitable because the HMBS issuer effectively lends the Additional Amounts at par, and can sell them in the form of HMBS Tails, usually at a premium. The excess interest portion is even better: its accrual creates an HMBS Tail without any additional cash outlay. The HMBS issuer effectively monetizes excess interest on their non-defaulted HECMs every time they issue a tail pool. A single pool can throw off profits to the issuer over a period of several years, although the premium will tend to decline over time as the underlying HECM loans approach maturity.

For 2013, RMS was once again the top HMBS issuer, issuing 226 pools totaling nearly $2.9 billion. RMS was followed by Urban Financial, Live Well Financial, Generation Mortgage and AAG, issuers of approximately $2.4 billion, $1.1 billion, $0.9 billion and $0.7 billion, respectively. AAG, Liberty, and Plaza Mortgage all joined the ranks of HMBS issuers in 2013. Overall, 12 firms issued HMBS in 2013, although a few of these are legacy issuers that do not currently produce or purchase new HECM production.

Of the $9.6 billion in 2013 issuance, $4.5 billion was fixed rate, representing a 47% market share, and the remaining $5.1 billion was adjustable rate. Fixed Rate HMBS issuance dropped from a 65% share last year, reflecting FHA’s changes to the HECM program.

Many of these pools will find their way into HREMIC securitizations; over 370 HMBS pools issued in 2013 have already been securitized (some partially) into HREMICs. HREMIC issuance, as we noted in our previous blog, fell off sharply in the fourth quarter of 2013, but HMBS issuance did not. In fact, HMBS issuance was distributed very evenly throughout the year.

The HREMIC market share of HMBS depends on the relative value of the HREMIC bonds, or classes, that are created from the cash flow of the underlying HMBS. Some investors are content to hold the HMBS itself, and earn premium interest over time. However, dealers often find it profitable to issue an HREMIC, in which HMBS serves as collateral for HREMIC bonds.

The HREMIC structure splits up the cash flow from an HMBS, or several HMBS, into two or more classes. Often this structure takes the form of a pass-through and an interest-only or “IO” class. The pass-through class typically has a par amount equal to the par amount of the underlying HMBS, but pays a lower interest rate. The IO is entitled to the excess interest, and is sold to another investor, often a hedge fund that is willing to bet on long duration. Basically, if the sum of the Pass-through price (typically at or near par) and the IO price (typically expressed as a multiple of the excess interest) exceeds the price of the underlying HMBS, HREMIC issuance may be the most profitable strategy.

In the fourth quarter of 2013, however, the bid for HMBS remained strong but the HREMIC bond bids faded, especially for the IOs. This is likely a short-lived market condition, and we do not foresee any long-lasting dislocation of the HREMIC market. In fact, HREMIC market share may even increase, to extent that new product changes add duration and thus relative value to IO classes.

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

HREMIC Issuance – 2013 Full Year

Monday, January 6th, 2014

HREMIC issuance for all of 2013 was off 18% from 2012, with 26 transactions totaling $4.95 billion. In 2012, 31 transactions totaling just over $6 billion were issued. HREMIC issuance fell sharply in the fourth quarter, with only 3 HREMICs totaling $313 million. No HREMICs were issued in December 2013, marking the first month since October 2011 without a single new HREMIC.

Bank of America Merrill Lynch captured the issuance crown again in 2013 with 10 issuances totaling $2.4 billion. Knight Capital was second with 4 issuances totaling $668 million, and Stifel Nicolaus was third with $617 million. BAML is the #1 all-time issuer with 43 HREMICs for $9.8 billion. Among active issuers, Barclays is #2 with 23 HREMICs for $3.9 billion, and RBS is #3 with 7 HREMICs for $1.0 billion since the inception of the program.

HREMIC collateral consists of HMBS, which are Ginnie Mae guaranteed pass-through securities. HMBS are backed by pools of participations of HECMs, which are FHA-insured reverse mortgages. In other words, the HECM loans are the collateral for the HMBS, which in turn serve as the collateral for the HREMIC. This double layer of government guarantee, combined with the relatively high coupon and favorable prepayment patterns of the underlying loans, results in very favorable execution, even when compared to other Ginnie Mae “forward mortgage” securities.

New View Advisors compiled these rankings from publicly available Ginnie Mae data.

HREMICs 2013-First Quarter Keeps Pace

Thursday, March 28th, 2013

First quarter 2013 HREMIC issuance matched last year’s record pace, with 8 HREMICs totaling $1.6 billion, according to Ginnie Mae data. Last year, 31 HREMICs came to market, totaling just over $6 billion. BofA Merrill Lynch edged out Knight Capital for the top underwriter/sponsor in the first quarter of 2013, leading 3 offerings totaling just over $660 million. Knight followed close behind with 3 issues totaling $570 million. BAML has captured the top spot in all four of the annual rankings in 2009 through 2012. In fact, BAML has sponsored nearly half of all of the HREMIC volume ever issued.

Since the first HREMIC was issued in 2009, 91 transactions totaling over $16.4 billion have been issued. Despite the decline in reverse mortgage origination, new HREMIC origination far outstrips the paydowns of these bonds. The overall HREMIC float could top $20 billion as early as the 4th quarter of this year.

In the first quarter of 2013, HREMIC sponsors used a total of 186 unique HMBS pools (or portions thereof) to create 65 classes of bonds. In doing so, they securitized nearly half of the new HMBS pools issued thus far in 2013. Since 2009, over 1000 unique HMBS pools have been securitized into HREMICs; we estimate that at least 70% of all new HECM supply will eventually find its way into HREMICs. Most of the HREMICs issued this quarter are backed by HMBS pools issued in 2013 and the latter part of 2012, but some include HMBS collateral issued as far back as 2009.

HREMIC collateral consists of HMBS, which are Ginnie Mae guaranteed pass-through securities. HMBS are backed by pools of participations of HECMs, which are FHA-insured reverse mortgages. In other words, the HECM loans are the collateral for the HMBS, which in turn serve as the collateral for the HREMIC. This double layer of government guarantee, combined with the relatively high coupon and favorable prepayment patterns of the underlying loans, results in very favorable execution, even when compared to other Ginnie Mae “forward mortgage” securities.