Archive for the ‘HECM Program’ Category

HECM Endorsement Analytics – October 2019

Monday, November 25th, 2019

HUD’s October 2019 HECM Endorsement Summary Report shows a total of 3,296 endorsements; it is a 36% increase from September’s 2,420 endorsements. Our summary can be found here: NV Endorsement 2019_10.  Other than in February 2019, when the market recovered from the year-end slowdown and reached over 4,000 endorsements, October’s endorsement count is the strongest since May 2018. Part of the increase in volume can be attributed to lower interest rates. Now that interest rate declines have stalled, it remains to be seen if higher endorsement volume will continue.

Based on annual endorsement count, the ranking of the top 15 originators changed only slightly. Most notably, Open Mortgage had 108 endorsements in October. It is the first time Open Mortgage has exceeded 100 endorsements since 2018Q1.

HUD released its September and October Endorsement Snapshot Reports simultaneously. The reports show that Finance of America Reverse sponsored 288 and 273 loans originated by another lender in September and October, respectively, maintaining its lead in this category. American Advisors Group sponsored 200 such loans in October. That’s the highest number American Advisors Group has produced since February 2018. Fairway sold 99 and 103 loans to another sponsor in September and October, still by far the most active seller of HECM closed loans.

HUD’s Snapshot Report breaks down endorsements by type. From 2016 to the beginning of 2018, between 10% and 20% of HECM endorsements were for refinance. From March 2018 until August 2019, that percentage dropped to approximately 5% per month. However, during the last two months, HECM Refinance endorsement count has crept back to more than 10% of total endorsement volume.

New View Advisors released its October update of the Who Buys What From Whom (WBWFW) report. As a reminder, the WBWFW report compiles publicly available Ginnie Mae data to show which HMBS issuers buy HECMs from which lenders. One of the reports displays loans sales by month, by top 100 lender, by HMBS issuer. The October update shows that over the past 12 months, 63% of total origination/securitization volume was sold from originators to HMBS Issuers. Only 37% was originated and securitized by the same company. Of those loans that exchanged hands, 70% were sold by the top 100 sellers, and 20% were sold by the top 2 sellers. The total trade volume from the Top 100 list took a dip in September, with $98 million HECMs originated, sold, and securitized, the lowest total in the last 12 months. August was the high water mark, with over $178 million HECMs originated, sold, and securitized.

HECM Endorsement Analytics – September 2019

Wednesday, 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.

HECM Endorsement Analytics – July 2019

Friday, 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.

HECM Endorsement Analytics – June 2019

Tuesday, July 2nd, 2019

HUD recently released its June 2019 HECM Endorsement Summary Reports, our summary of which can be found here: NV Endorsement Report 2019_06.  The report shows a total of 2,544 endorsements, 6% lower than May’s 2,697 units, and as we reported last month, still 20% lower year-over-year.

There were no material variations in regional origination from May. The Santa Ana Center continues to account for approximately 40% of total volume, and Los Angeles was Santa Ana’s most active field office in June with 175 endorsements.

Fairway Independent Mortgage remains the most active wholesale originator that sells its loans to other sponsors. This month Fairway is the originator of 70 such loans endorsed by HUD. Liberty Home Equity Solution sponsored the most loans originated by another lender for the second straight month, with 236 endorsements. Assuming this trajectory continues, Liberty will eclipse Reverse Mortgage Funding next month for sole position of second place, behind only Finance of America Reverse. June is the first month Liberty sponsored more loans than FAR.

HECM loan rates headed lower again last month as 10-year LIBOR reached 1.95%, its lowest level since November 2016. 10-year LIBOR is the benchmark used to calculate the Expected Rate for LIBOR based adjustable rate HECMs.

This month we take a closer look at county-level market penetration. For the analysis we looked at the number of endorsements from the last 12 months as a percentage of the older-than-60 population. Despite many California counties having the most HECM endorsements by unit count, none ranked in the top ten in terms of market penetration. Of the counties where at least 100 HECM loans were endorsed in the past year, seven counties from Colorado made the top ten list, and Washington County Utah ranked highest at 0.5%.

HECM Endorsement Analytics – May 2019

Monday, 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.

HECM Endorsement Analytics – April 2019

Wednesday, 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.

New View Advisors HECM Endorsement Analytics

Monday, 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.

Financial Assessment Is Working (Part IV)

Wednesday, November 1st, 2017

Financial Assessment is still working. FHA’s new policy of requiring a financial assessment (“FA”) of the borrower’s ability to pay has cut tax and insurance default by nearly three quarters and serious defaults by almost two-thirds. These results continue to validate the encouraging data we shared in previous quarters.

FHA’s objective for the new Financial Assessment regulations was to reduce the persistent defaults, especially Tax and Insurance defaults, plaguing the HECM program. As FHA put it, “… an increasing number of tax and hazard insurance defaults by mortgagors led FHA to establish … a requirement for a Financial Assessment of a potential mortgagor’s financial capacity and willingness to comply with mortgage provisions.” Financial Assessment requirements became effective for HECMs with case numbers issued on or after April 27, 2015. Since then, HECM lenders must make a financial assessment of the borrower’s ability to meet their obligations, including property taxes and home insurance. Tax and Insurance (T&I) and other defaults can lead to foreclosure and result in significant losses to FHA, HMBS issuers and other HECM investors. Defaults rose steadily during the financial crisis and have remained a thorn in the side of the program.

It’s been over two years since Financial Assessment began, so we can measure the effect of this policy by comparing the default rates of loans originated before and after the FA rule was implemented.

With this in mind, New View Advisors looked at a data set of just over 125,000 HECM loans, comparing loans originated in the immediate post-FA period from July 2015 through September 2017 to loans originated in the 27 month pre-FA period from January 2013 through March 2015. After July 2015, there were few (if any) loans originated under the pre-FA guidelines. As the guidelines took effect in April 2015, the second quarter of 2015 includes a mix of FA and pre-FA loans.

The data show a very strong reduction in Tax and Insurance Defaults in the post-FA period. After 27 months, the pre-FA data set shows a T&I default rate of 2.3%, and an overall serious default rate of 3.1%. By contrast, the post-FA data set shows a T&I default rate of about 0.6%, and an overall serious default rate of 1.2%. For the purposes of this analysis, we define serious defaults as T&I defaults plus foreclosures and other “Called Due” status loans.

Given this result, we once again give the Financial Assessment concept high marks for reducing defaults. However, this is another mid-term grade that needs to be tested further as the post-FA portfolio ages.

Average loan size and subsequent draws are also higher for the post-FA market. Average loan balances are about 12% higher for loans currently aged 27 months or less compared to the comparable HECM loan population as of March 2015. This is not surprising since homeowners of more expensive home generally have better credit and ability to pay. Also, FHA now limits the amount that can be lent in the first 12 months. As recent months of HMBS issuance show, subsequent draws and HMBS “tail” issuance are a driving force in the industry’s profits. Dollars lent, and not just at initial loan funding, is the true metric by which the industry should measure industry growth.

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

Financial Assessment Is Working (Part III)

Wednesday, August 16th, 2017

Financial Assessment is still working. FHA’s new policy of requiring the financial assessment (“FA”) of the borrower’s ability to pay has cut tax and insurance default by nearly three quarters and serious defaults by almost two-thirds. These results continue to validate the encouraging data we shared 3 months and 6 months ago.

FHA’s objective for the new Financial Assessment regulations was to reduce the persistent defaults, especially Tax and Insurance defaults, plaguing the HECM program. As FHA put it, “… an increasing number of tax and hazard insurance defaults by mortgagors led FHA to establish … a requirement for a Financial Assessment of a potential mortgagor’s financial capacity and willingness to comply with mortgage provisions.” Financial Assessment requirements became effective for HECMs with case numbers issued on or after April 27, 2015. Since then, HECM lenders must make a financial assessment of the borrower’s ability to meet their obligations, including property taxes and home insurance. Tax and Insurance (T&I) and other defaults can lead to foreclosure and result in significant losses to FHA, HMBS issuers, and other HECM investors. Defaults rose steadily during the financial crisis and have remained a thorn in the side of the program.

It’s been over two years since Financial Assessment began, so we can measure the effect of this policy by comparing the default rates of loans originated before and after the FA rule was implemented.

With this in mind, New View Advisors looked at a data set of just over 115,000 HECM loans, comparing loans originated in the immediate post-FA period from July 2015 through June 2017 to loans originated in the 24 month pre-FA period from April 2013 through March 2015. After July 2015, there were few (if any) loans originated under the pre-FA guidelines. As the guidelines took effect in April 2015, the second quarter of 2015 includes a mix of FA and pre-FA loans.

The data show a very strong reduction in Tax and Insurance Defaults in the post-FA period. After 24 months, the pre-FA data set shows a T&I default rate of 2.1%, and an overall serious default rate of 2.8%. By contrast, the post-FA data set shows a T&I default rate of only 0.6%, and an overall serious default rate of 1.0%. For the purpose of this analysis, we define serious defaults as T&I defaults plus foreclosures and other “Called Due” status loans.

Given this result, the Financial Assessment concept gets high marks for reducing defaults. The table below shows the improving portfolio trendline from pre-FA to post-FA at 18, 21, and 24 months. We will continue to monitor progress as the post-FA portfolio ages.

Average loan size and subsequent draws are also higher for the post-FA market. Average loan balances are about 11% higher for loans currently aged 24 months or less compared to the comparable HECM loan population as of March 2015. This is not surprising since homeowners of more expensive home generally have better credit and ability to pay. Also, FHA now limits the amount that can be lent in the first 12 months. As recent months of HMBS issuance show, subsequent draws and HMBS “tail” issuance are a driving force in the industry’s profits. Dollars lent, and not just at initial loan funding, is the true metric by which the industry should measure industry growth.

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

 

Financial Assessment Looks Better and Better

Wednesday, May 24th, 2017

Financial Assessment is still working, only more so. FHA’s new policy of requiring financial assessment (“FA”) of the borrower’s ability to pay has cut tax and insurance default by nearly three quarters and serious defaults by almost two-thirds. These results are even better than the encouraging data we shared this past February.

FHA’s objective for the new FA regulation was to reduce the persistent defaults, especially Tax and Insurance (“T&I”) defaults, plaguing the HECM program. As FHA put it, “… an increasing number of tax and hazard insurance defaults by mortgagors led FHA to establish … a requirement for a Financial Assessment of a potential mortgagor’s financial capacity and willingness to comply with mortgage provisions.”

T&I and other defaults can lead to foreclosure and result in significant losses to the FHA’s insurance fund, issuers of HMBS securities, and other HECM investors. Defaults rose steadily during the financial crisis and have remained a thorn in the side of the program.

Financial Assessment requirements became effective for HECMs with case numbers issued on or after April 27, 2015. Since then, HECM lenders must make a financial assessment of the borrower’s ability to meet their obligations, including property taxes and home insurance. Because it’s been more than two years since Financial Assessment began, we can measure the effect of this policy by comparing the default rates of loans originated before and after the FA rule was implemented.

With this in mind, New View Advisors looked at a data set of just under 100,000 HECM loans, comparing loans originated in the immediate post-FA period from July 2015 through March 2017 to loans originated in the 21 month pre-FA period from July 2013 through March 2015.   After July 2015, there were few (if any) loans originated under the pre-FA guidelines. As the guidelines took effect in April 2015, the second quarter of 2015 includes a mix of FA and pre-FA loans.

The data show a very strong reduction in T&I Defaults in the post-FA period.   After 21 months, the pre-FA data set shows a T&I default rate of 1.9%, and an overall serious default rate of 2.5%. By contrast, the post-FA data set shows a T&I default rate of only 0.5%, and an overall serious default rate of 0.9%. For the purposes of this analysis, we define serious defaults as T&I defaults plus foreclosures and other “Called Due” status loans.

Given this result, we once again give the Financial Assessment concept high marks for reducing defaults. However, this is another mid-term grade that needs to be tested further as the post-FA portfolio ages.

Average loan size and subsequent draws are also higher for the post-FA market. Average loan balances are about 10% higher for loans currently aged 21 months or less compared to the comparable HECM loan population as of March 2015. This is not surprising since homeowners of more expensive home generally have better credit and ability to pay. Also, FHA now limits the amount that can be lent in the first 12 months. As recent months of HMBS issuance show, subsequent draws and HMBS “tail” issuance are a driving force in the industry’s profits. Dollars lent, and not just at initial loan funding, is the true metric by which the industry should measure industry growth.

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