New View Advisors and Recursion Reverse Mortgage Prepayment Indices – June 2024

July 10th, 2024

The New View Advisors and Recursion June 2024 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 06_2024. The indices are derived from underlying HECM data in HMBS made public by Ginnie Mae, as well as private sources. This 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 June 2024 Part II: Summer Doldrums

July 10th, 2024

Total HMBS payoffs in June decreased from May; overall prepayment speeds decreased to 16.7% per annum from May’s 18.1% per annum. Outstanding HMBS decreased to $58.25 billion – the seventh consecutive decrease and the 15th of the last 17 months.

Finance of America is the issuer of record of $17.3 billion or about 29.7% of all outstanding HMBS, having edged out Ginnie Mae last month. Along with Ginnie Mae at 29%, Longbridge at 15%, and PHH at 13%, these four Issuers account for 86% of all outstanding HMBS.

As previously mentioned, Ginnie Mae took over RMF’s HMBS portfolio in December 2022. “Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 3,990 former RMF pools. About $306 million of Issuer 42’s portfolio paid off in June, but Issuer 42 still accounts for $16.7 billion of all outstanding HMBS. Issuer 42 has not issued any tail pools; we estimate Issuer 42 now has an approximate $1.1 billion uncertificated position, that is, the excess of their portfolio’s HECM asset balance over the balance of their HMBS liability.

When a HECM loan balance reaches 98% of its MCA, the HMBS issuer is required to buy it out of the HMBS pool, and then assign the loan to HUD if the loan is not in default. This is effectively a prepayment event for the HMBS investor, even though the underlying HECM loan remains outstanding. According to our friends at Recursion, payoffs last month due to Mandatory Purchases occurred at a rate of 9.7% per annum – the same as May.

Including the Mandatory Purchases, HMBS paid off at a 16.7% annual rate in June, and 17.1% over the last 12 months. Exclusive of Mandatory Purchases, the rate of HMBS payoffs over the past 12 months is well below the prior 12 months. Natural payoffs (those other than Mandatory Purchases) for the 12 month period ending June 30th were 7.2% per annum, compared to 8.7% for the prior 12 month period.

Ginnie Mae published its “HMBS 2.0” Term Sheet for comment last month. The new HMBS program will allow securitization of HECM loans that have UPBs in excess of 98% of the Maximum Claim Amount. Once implemented, HMBS 2.0 should increase HMBS issuance materially by financing most mandatory buyouts, which exceeded $500 million last month according to Recursion.

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

HECM Endorsement Analytics – June 2024

July 2nd, 2024

After a strong May, endorsement activity gave up its gain and dropped 14.4%, back to 2,105 HECMs in June. Our full report can be found here: NV Endorsement 2024_06.

HUD’s May Endorsement Snapshot Report was just released, showing no material changes in wholesale origination and sponsorship activities, or refinance volume.

2024 First Half HMBS Issuer League Tables

July 1st, 2024

FAR remains YTD lead HMBS issuer through 2024Q2, with $909 million issued and 32% market share. Longbridge stays in second, with $609 million issued and 21% market share. Mutual of Omaha Mortgage moved up a notch to third, with $524 million issued, for an 18.4% market share, and PHH was fourth with $512 million issued and 18% market share. There were eleven issuers, with Money Source and Money House returning to market. Per the usual, the Top Four issuers accounted for 90% of all HMBS issuance for the half.

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

HMBS June 2024: HMBS 2.0 – Cure For The Summertime Blues?

July 1st, 2024

The HMBS new issue market fell in June. HECM Mortgage-Backed Securities (“HMBS”) issuance totaled $497 million, $29 million lower than May’s $526 million. 86 pools were issued in both June and May. HMBS issuance remains near historical lows, comparing monthly issuance dating back to 2010.

Ginnie Mae published its “HMBS 2.0” Term Sheet for comment last week. The new HMBS program will allow securitization of HECM loans that have UPBs in excess of 98% of the Maximum Claim Amount. Once implemented, HMBS 2.0 will increase HMBS issuance substantially by financing most mandatory buyouts, which exceeded $500 million last month according to Recursion.

FAR was the top issuer again in June with $159 million – $2 million more than May’s $157 million. Issuance from Longbridge decreased by $8 million to $110 million. Mutual of Omaha and PHH issued $95 million and $85 million respectively. Ginnie Mae/RMF (aka “Issuer 42”) again issued no HMBS pools.

HMBS issuance set a record in 2022, with nearly $14 billion issued. Total issuance for 2023 was approximately $6.5 billion. 2024 total issuance through June totals $2.8 billion – $328 million lower than at this time last year and $5.6 billion lower than at this time in 2022.

June’s original (first participation) production of $331 million was $30 million lower than May’s $361 million. June’s original new loan pool production was substantially lower than that of June 2023, when approximately $385 million in original new HMBS pools were issued.

The 86 pools issued in June consisted of 24 first-participation or original pools and 62 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. Last month’s tail pool issuances totaled $166 million, below the typical range.

Notable in the June HMBS issuance data are 26 pools with aggregate pool size less than $1 million. Issuers are taking advantage of Ginnie Mae’s provision to issue pools as small as $250,000. This represents $14.3 million of UPB in June that otherwise would not have been issued. Ginnie Mae published APM 23-11 in September which allows participations from the same loan to be pooled more than once in the same month. The aggregate of participations pooled in June for which more than one participation from the same loan was pooled is $55 million, of which $2 million were first participations.

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 2024

June 11th, 2024

The New View Advisors and Recursion May 2024 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 05_2024. The indices are derived from underlying HECM data in HMBS made public by Ginnie Mae, as well as private sources. This 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 2024 Part II: FAR Ahead

June 11th, 2024

Finance of America has replaced Ginnie Mae as the top HMBS Issuer of record, with $17.2 billion, or about 29.5% of all outstanding HMBS. Along with Ginnie Mae (29%), Longbridge (14%), and Onity (13%), the top four Issuers account for 86% of outstanding HMBS.

As mentioned in previous blogs, Ginnie Mae took over RMF’s HMBS portfolio in December 2022. “Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 3,993 former RMF pools. About $352 million of Issuer 42’s portfolio paid off in May, but Issuer 42 still accounts for $16.90 billion of all outstanding HMBS. Issuer 42 has not issued any tail pools; we estimate Issuer 42 now has approximately $1.1 billion uncertificated position, that is, the excess of their portfolio’s HECM asset balance over the balance of their HMBS liability.

When a HECM loan balance reaches 98% of its MCA, the HMBS issuer is required to buy the loans out of the HMBS pool, and then may assign the loan to HUD if the loan is not in default. This is effectively a prepayment event for the HMBS investor, even though the underlying HECM loan remains outstanding. According to our friends at Recursion, payoffs last month due to Mandatory Purchases occurred at a rate of 9.7% per annum compared to April’s 9.8% per annum.

Total HMBS payoffs in May showed a slight increase versus April; overall prepayment speeds increased to 18.1% per annum from April’s 17.9% per annum, and 17.3% over the last 12 months. Exclusive of Mandatory Purchases, the rate of HMBS payoffs over the past 12 months is well below the prior 12 months. Natural payoffs (those other than Mandatory Purchases) for the 12 month period ending May 31st were 7.4% per annum, compared to 9.4% for the prior 12 month period.

Outstanding HMBS decreased to $58.3 billion – the sixth consecutive decrease and 14th out of the last 16 months.

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

HECM Endorsement Analytics – May 2024

June 4th, 2024

May was a strong month, posting 2,460 endorsements.  Endorsement activity increased 17% from April, and is at its highest level since October 2023.  Our full report can be found here:  NV Endorsement 2024_05.

HUD’s April Endorsement Snapshot Report was just released.  Over the past two months, HECM to HECM refis rebounded slightly, to 9% of total endorsements.

HMBS May 2024: May The Force Be With You

June 3rd, 2024

The HMBS new issue market continued to inch up in May. HECM Mortgage-Backed Securities (“HMBS”) issuance totaled $526 million in May, $23 million higher than April’s $503 million. 86 pools were issued in May, versus 89 in April. Nonetheless, HMBS issuance remains near historical lows, comparing monthly issuance dating back to 2010.

FAR was the top issuer again in May with $157 million – $2 million more than April’s $155 million. Issuance from Longbridge increased by $11 million to $118 million. Mutual of Omaha and PHH issued $106 million and $85 million respectively. Ginnie Mae/RMF (aka “Issuer 42”) again issued no HMBS pools.

HMBS issuance set a record in 2022, with nearly $14 billion issued. Total issuance for 2023 was approximately $6.5 billion. 2024 is off yet more, with total issuance through May totaling $2.4 billion – $236 million lower than at this time last year and $4.8 billion lower than at this time in 2022.

May’s original (first participation) production of $360 million was $38 million higher than April’s $322 million, and higher than that of May 2023, when approximately $352 million in original new HMBS pools were issued.

The 86 pools issued in May consisted of 22 first-participation or original pools, 63 tail pools, and 1 pool which included both new production and tails. 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. Last month’s tail pool issuances totaled $164 million, below the typical range.

Notable in the May HMBS issuance data are 22 pools with aggregate pool size less than $1 million. Issuers are taking advantage of Ginnie Mae’s provision to issue pools as small as $250,000. This represents $11.4 million of UPB that may not otherwise have been issued in May. Ginnie Mae issued APM 23-11 in September which allows participations from the same loan to be pooled more than once in the same month. The aggregate of participations pooled in May for which more than one participation from the same loan was pooled is $53 million, of which $3 million were first participations.

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 2024

May 13th, 2024

The New View Advisors and Recursion April 2024 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 04_2024. The indices are derived from underlying HECM data in HMBS made public by Ginnie Mae, as well as private sources. This 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.