December HMBS 2018 Part II: Fixed A-Fixin’ For Extinction (Or At Least Constriction) Due To HUD Restrictions

January 10th, 2019

HMBS float fell again in December as big payoffs continued to outweigh falling issuance.  With just over $900 million in payoffs, total outstanding HMBS ended the month at $55.1 billion, down from about $55.3 billion at the end of November.  HMBS float has been range-bound between just under $55 billion to $57 billion for over two years.

Fixed Rate HMBS, which once reigned as King of all HMBS Product Types, has shrunk to just over $13 billion in outstanding float, down from $19.1 billion at year-end 2017 and $24.8 billion at the end of 2016.  Barely $1 billion in fixed rate HMBS was issued in 2018. This is the result of HECM program changes that severely restricted the full Principal Limit initial borrowing, the staple of fixed rate HECM.

As noted last week, HMBS issuance was only about $619 million in December, including a few highly seasoned new issues.

We predict continuing declines in Mandatory Buyouts in the foreseeable future. “Peak Buyout” was an echo of the issuance from 2009 through the first half of 2013.  Much of this production has now been repurchased or repaid by borrowers. Although many loans continue to reach their buyout threshold equal to 98% of their Maximum Claim Amount (“MCA”), Peak Buyout appears to have ended.  Going forward, billion-dollar-plus payoff months will be the exception rather than the rule.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $625 million, or about 68%, of the payoffs last month.  This is down $40 million from November, and continues a generally downward trend from the 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.

2018 HMBS Issuer Rankings – RMF Surges Ahead

January 3rd, 2019

RMF was the #1 start-to-finish HMBS issuer in 2018, responsible for $3.92 billion of HMBS securities, a whopping 41% market share, well ahead of second place AAG’s 20% share. RMF’s tally includes approximately $600 million of HMBS it purchased from Live Well Financial in November. AAG issued $1.91 billion of HMBS for the year, virtually all new issuance and tails. FAR stays in third with $1.34 billion issued and 14% market share. Ocwen Loan Servicing and Longbridge Financial round out the top five issuers. Ocwen issued $728.7 million for a 10% market share, and Longbridge was fifth with $599 million issued for a 6% market share. This is Longbridge Financial’s first appearance in the Top Five. These five issuers accounted for almost 92% of all issuance, a record. There were 14 active HMBS issuers last quarter – only Bank of America did not issue HMBS in Q4 (or Q3).

2018 saw nearly $9.6 billion of HMBS issued, with Q4 issuance at $2.2 billion. For comparison, total HMBS issuance volume in 2017 equaled $10.5 billion. Thank a 2018 total of highly seasoned issuance from RMF of nearly $2.2 billion for the relatively strong issuance totals. However, as previously noted, unless highly seasoned pool issuance continues, expect lower volume going forward. Tail issuance continues to provide volume (and profit) stability to HMBS issuers to offset the new issue slowdown. Of 2018’s issuance, $2.7 billion was from tails.

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

December 2018 HMBS: Mostly Coal in the Stocking, Annual Issuance Falls Over $900 Million

January 2nd, 2019

HMBS issuance rose in December 2018 to just over $619 million, helped by three highly seasoned pools of original collateral. Without those three issues, December issuance was very similar to November’s weak numbers, which were the lowest issuance level in over four years. Just 95 pools were issued in December. Less than $300 million of new first participation pools were issued. Additional shrinkage in HMBS float seems likely this month.

For the entire 2018 calendar year, HMBS issuance totaled about $9.6 billion, compared to $10.5 billion in 2017. The various headwinds facing the market, higher interest rates, lower PLFs, etc., will probably reduce volume further in 2019.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the new lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Mortgages (“HECMs”) effective last Fiscal Year.

Production of original new loan pools was just under $277 million, down from November’s $298 million, October’s $325 million and $360 million in September. December’s tail pool issuances totaled $237 million, within the range of recent tail issuance. By comparison, HMBS issuers sold 106 pools totaling $1.3 billion in December 2017.  After last month’s portfolio sale, Live Well Financial was back in the market, issuing approximately $46 million of HMBS.

December 2018 issuance divided into 39 original pools and 56 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.

November 2018 HMBS Part II: Market Shrinkage Continues; LiveWell Portfolio Sold; Peak Buyout Ends

December 11th, 2018

HMBS float fell in November as big payoffs continued to outweigh falling issuance. With just under $1 billion in payoffs, total outstanding HMBS ended the month at $55.3 billion, down from about $55.5 billion at the end of October. HMBS float has been range-bound between just under $55 billion to $57 billion for over two years.

As we noted last week, HMBS issuance was only $521 million in November, with no highly seasoned new issuance. However, the usual issuer of highly seasoned original pools was not idle during November. The Ginnie Mae data reveals Reverse Mortgage Funding bought Live Well Financial’ s issuance portfolio totaling just over $4 billion. That gives RMF an outstanding portfolio of almost $12.7 billion, surpassing Nationstar Mortgage as the top issuer portfolio.

Although many loans continue to reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”), Peak Buyout appears to have ended. Peak Buyout is 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 should be the exception rather than the rule.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $665 million, or about 70% of the payoffs last month. This continues a general downward trend from the 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.

November 2018 HMBS: Looking For Mr. Good Nadir

December 4th, 2018

HMBS issuance fell in November 2018 to just over $521 million, the lowest issuance level in over four years. In all, 84 pools were issued in November, the fewest since February 2015. Further shrinkage in HMBS float seems inevitable. Where is the bottom? Last summer a garden of hopeful metaphors bloomed, in which Bouncing Dead Cats Turned the Corner just in time to witness the Nadir of the HECM. But the market has yet to find its new normal.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the new lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Mortgages (“HECMs”) effective last year. Rising interest rates will not help either, as they generally require lower PLFs.

Production of original new loan pools was just under $298 million, down from October’s $325 million and $360 million in September. Last month’s tail pool issuances totaled $224 million, within the range of recent tail issuance. By comparison, HMBS issuers sold 107 pools totaling $913 million in October 2017.

November 2018 issuance divided into 31 original pools and 53 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. As we noted last month, tail HMBS issuance can generate profits for years, helping HMBS issuers in challenging periods.

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

October 2018 HMBS: Scary Seasonal Mask Hides Market Decline

November 9th, 2018

HMBS float grew in October thanks to a large issuance of highly seasoned collateral. Despite over $1 billion in payoffs, HMBS ended the month at $55.5 billion, up from about $55.3 billion at the end of September. HMBS issuance was also just over $1 billion, $473 million of which accounted for by three large highly seasoned issues. HMBS float has been range-bound between $55 billion and $57 billion, but could fall below that soon as payoffs usually outweigh issuance of new pools and negative amortization of existing pools.

Production of original new loan pools was about $325 million, down from September’s $360 million and August’s $344 million totals. Last month’s tail pool issuances totaled $220 million, within the range of recent tail issuance. In October 2017, HMBS issuers sold 107 pools totaling $913 million, of which $615 million was original new loan pools.

October 2018 issuance divided into 43 original pools and 56 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. As we noted last month, tail HMBS issuance can generate profits for years, helping HMBS issuers in challenging periods.

We predicted earlier this year “we may be at Peak Buyout, and see a relative decline in Mandatory Buyouts in the near future.“ Peak Buyout is 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. Payoffs have exceeded $1 billion per month for 12 of the last 15 months as many loans reached their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”).

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $632 million, or about 65%, of the payoffs last month. This continues a downward trend from August’s record of $869 million.

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

September 2018 HMBS Part II: Market Volume Numbers Fall in Autumn

October 15th, 2018

HMBS float shrank again despite a significant decline in payoffs. Just under $1 billion in payoffs reduced HMBS float to $55.3 billion, down from about $55.5 billion at the end of August. As we noted last week, HMBS issuance rose slightly in September 2018 to just over $587 million, a small increase over August, but much less than payoffs. HMBS float has been range-bound between $55 billion and $57 billion, but could slip below that soon as payoffs continue to outweigh new issuance.

We predicted earlier the industry “may be at Peak Buyout and see a relative decline in Mandatory Buyouts in the near future.”  Last month’s overall payoffs and Mandatory Purchases were at seven month lows. Peak Buyout is 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. Payoffs nonetheless have exceeded $1 billion per month for 11 of the last 14 months, as many loans reached their assignment threshold, equal to 98% of their Maximum Claim Amount (“MCA”).

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $653 million, or about 69%, of the payoffs in September. This is down sharply from last month’s record of $869 million.

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

2018 First Nine Months HMBS Issuer Rankings –Volume Slows

October 4th, 2018

RMF keeps its pole position after the first nine months of 2018, issuing $2.52 billion of HMBS securities for a 33.9% market share, a drop from its commanding 40% Q2 market share, but still well ahead of second place AAG. AAG issued $437 million of HMBS in Q3, 73% more than RMF’s $253 million, for an overall 20% market share. RMF issued no seasoned pools in the quarter. FAR stays in third with $1.06 billion issued and 14.3% market share. Ocwen Loan Servicing and Live Well Financial again round out the top five issuers. Ocwen issued $728.7 million for a 9.8% market share, and Live Well was fifth with $522.1 million issued for a 7% market share. The top five issuers accounted for 85% of all issuance, down 1% from last quarter. There were 14 active HMBS issuers last quarter – only Bank of America did not issue HMBS in Q3.

The first nine months of 2018 saw $7.43 billion of HMBS issued, with Q3 issuance at $1.71 billion, off by more than $1 billion from either the first or second quarters. Unless highly seasoned pool issuance returns, expect lower volume for the foreseeable future. As we have noted previously, tail issuance will provide some volume (and profit) stability to HMBS issuers to offset this slowdown. HMBS issuance volume for the first nine months of 2017 totaled $7.29 billion.

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

September 2018 HMBS: Try to Remember That Time in September (of Last Year)

October 3rd, 2018

HMBS issuance rose in September 2018 to just over $587 million, a small increase over August, but still one of the lowest issuance months in recent years. No highly seasoned pools were issued. In all, 104 pools were issued in September. When all the data are in, we expect another $1 billion plus in payoffs to shrink HMBS float again.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Mortgages (“HECMs”) effective last year. Rising interest rates will not help either, as they generally require lower PLFs.

Production of original new loan pools was about $360 million, up from August’s $344 million, but these small, short-term upticks in HMBS production are hardly proof of a recovery. Last month’s tail pool issuances totaled $213 million, within the range of recent tail issuance. By comparison, HMBS issuers sold 114 pools totaling $879 million in September 2017.

September 2018 issuance divided into 45 original pools and 59 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. As we noted last month, tail HMBS issuance can generate profits for years, helping HMBS issuers in challenging periods.

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

August 2018 HMBS: Cat Has Eight Lives Left

September 13th, 2018

HMBS issuance rose slightly in August 2018 to just over $579 million, a small increase over July, which was the lowest issuance month in nearly four years. No highly seasoned pools were issued. In all, 110 pools were issued in August. Over $1.2 billion in payoffs shrank HMBS float by a record $500 million. Last month we noted that since February 2017 HMBS float has been range-bound between $55 billion and $57 billion but could fall below that range with the continued payoff deluge and issuance drought. That could happen as early as next month, with outstanding HMBS now below $55.5 billion.

Payoffs have exceed $1 billion per month for 11 of the last 13 months, a trend likely to continue as many loans reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”). Meanwhile, reverse mortgage lenders face a long winter of reduced volume, primarily due to the new lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Mortgages (“HECMs”) effective this fiscal year. Rising interest rates will not help either, as they generally require lower PLFs.

Production of original new loan pools was about $344 million, up from July’s $318 million, but these small, short-term upticks in HMBS production or HECM endorsements are hardly proof of a recovery or even a dead cat bounce. They are more like the window awnings that break the fall of a cat from a high roof. August production was also down from June’s $353 million, May’s $367 million, April’s $401 million, and down sharply from $604 million in February, $657 million in January and $747 million in December 2017. HMBS issuance topped $916 million in August 2017. Last month’s tail pool issuances totaled $235 million, within the range of recent tail issuance. We shall see if the cat still has eight lives left or merely bounces eight times when it hits the ground.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $869 million, or about 70%, of the payoffs in August. This shatters the record $791 million set last November.

August issuance divided into 51 original pools and 59 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. As we noted last month, Tail HMBS issuance can generate profits for years, helping HMBS issuers in challenging periods.

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