Archive for the ‘HECM Program’ Category

HECM Endorsement Analytics – April 2020

Monday, May 4th, 2020

HUD’s April 2020 HECM Endorsement Summary Report shows a total of just 1,601 endorsements, New View Advisors’ summary and analysis of which can be found here: NV Endorsement 2020_04. The impact of Coronavirus is undoubtedly the culprit of the slowdown. Lending activities have stalled meaningfully. The secondary market for the HMBS program has stabilized during the past month, but nobody is expecting the market to return to pre-pandemic execution any time soon. Back-end liquidity remains a concern for the industry. Time will tell whether April’s low endorsement count will be overshadowed by new opportunity to provide HECM loans to seniors, those most affected by Covid-19.

Geographically the slowdown is widespread. Notably, many major field offices on the west coast recorded endorsements less than half of counts from the previous month. For example, San Francisco and Seattle had 55 and 49 endorsements compared to 137 and 126 respectively in March. Salt Lake City and Denver saw drastic declines as well, with endorsements dropping to 56 and 132 in April, down from 109 and 247 in March. Numbers in southern locales are more mixed. Miami only had 29 endorsements compared to March’s 80, while Houston had 44 versus March’s 47.

Several top originators stand out in the decline of endorsements. Synergy One Lending, Open Mortgage, High Tech Lending, and Cherry Creek Mortgage all had zero endorsements for the month. Reverse Mortgage Funding and Liberty Home Equity Solution saw their endorsement count decline by 91% and 70% month-over-month, respectively.

The March Endorsement Snapshot Report is now available on HUD’s website. This report does not show notable changes in HECM endorsement volume because it is released with a one-month lag. Next month’s report will likely be more illuminating.

New View Advisors continues to offer its Who Buys What From Whom (WBWFW) report as part of this endorsement report subscription. The report compiles publicly available Ginnie Mae dollar volume data to show which HMBS issuers buy HECMs from which lenders. The WBWFW report includes:

1.  Top Originators – a ranking by original HECM UPB of all lenders over the last twelve months
2.  WBWFW – an alphabetical cross-reference between every lender and the HMBS issuer that securitizes its loans
3.  Top 100 Trends – a breakdown of loan sales by month, by Top-100 lender, by HMBS issuer.

Edited samples from the WBWFW report are at the end of our endorsement summary. 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 alone can show.

Financial Assessment Is Working (Part VI)

Monday, April 20th, 2020

Financial Assessment is still working. Now in its sixth year, FHA’s policy of requiring the financial assessment (FA) of borrowers’ ability to pay has cut tax and insurance (T&I) defaults by over 75% and serious defaults by over two-thirds. These results continue to validate the encouraging data we shared in previous years.

FHA’s objective for its Financial Assessment regulations was to reduce the persistent defaults, especially T&I defaults, plaguing the HECM program in 2009-2014. 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 make a financial assessment of borrowers’ ability to meet their obligations, including property taxes and home 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 remained a thorn in the side of the program until Mortgagee Letters 2014-21, 2014-22, and 2015-06 were released.

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

With this in mind, we looked at a data set of more than 200,000 HECM loans, comparing loans originated in the immediate 57 month post-FA period from July 2015 through March 2020 to loans originated in the 57 month pre-FA period from July 2010 through March 2015. After July 2015, there were few (if any) loans originated under pre-FA guidelines. As Financial Assessment took effect in April 2015, the second quarter of 2015 included a mix of FA and pre-FA loans.

The data show a very strong reduction in T&I defaults in the post-FA period. As of March 31, 2015, the pre-FA data set had a T&I default rate of 4.7%, and an overall serious default rate of 6.8%. As of March 31, 2020, the comparable post-FA data set shows a T&I default rate of approximately 1.1%, and an overall serious default rate of 2.2%. For the purpose of this analysis, we define serious defaults as T&I defaults plus foreclosures plus other “Called Due” status loans.

Over the past few years, FHA has taken a number of steps to reduce defaults in its HECM program. These include Mortgagee Letter 2013-27, which limits in certain cases the amount that can be lent in the first 12 months. Also, a series of Principal Limit Factor (PLF) reductions has reduced the amount lent even when the loan is fully drawn.

Given these results, we continue to give Financial Assessment high marks for reducing defaults. Previously, we referred to these results as a “mid-term grade that needs to be tested further as the post-FA portfolio ages.” After nearly 5 years of experience, it is clear the HECM program has graduated to a sounder credit footing. The coming months will show how well this reformed HECM program weathers a likely serious economic downturn.

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

HECM Endorsement Analytics – February 2020

Monday, March 2nd, 2020

HUD’s February 2020 HECM Endorsement Summary Report shows a total of 3,386 endorsements. It is lower than last month’s 3,919, but adjusted for day count a very strong number considering the previous 12 months averaged fewer than 2,900 units. Our summary can be found here: NV Endorsement 2020_02. While HMBS issuance is a more accurate barometer of current HECM originations, endorsement count does provide reasonable long-term trend vectors.

AAG had 691 endorsements, a significant drop from last month’s 1,141 endorsements. Liberty Home Equity Solutions kept its strong pace and endorsed 582 loans, 107 more than last month. Fairway endorsed 150, almost matching its record from Jan 2018. Live Well Financial has finally dropped off the top 15 originators list.

HUD’s January Endorsement Snapshot Report is now published on their website. Liberty Home Equity Solutions sponsored 501 loans originated by another lender. Finance of America Reverse, AAG, and Reverse Mortgage Funding followed with 333, 264, and 263 loans, respectively. Fairway sold 93 loans to another sponsor, followed by Ennkar with 63.

New View Advisors continues to offer its Who Buys What From Whom (WBWFW) report as part of this endorsement report subscription. The report compiles publicly available Ginnie Mae dollar volume data to show which HMBS issuers buy HECMs from which lenders. The WBWFW report includes:

Top Originators – a ranking by original HECM UPB of all lenders over the last twelve months

WBWFW – an alphabetical cross-reference between every lender and the HMBS issuer that securitizes its loans

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 – January 2020

Monday, February 3rd, 2020

HUD’s January 2020 HECM Endorsement Summary Report shows 3,919 endorsements, a strong start for the year, though volume may include backlogged pipeline from year-end. Our summary can be found here: NV Endorsement 2020_01. The increase in volume is evenly distributed geographically. Compared to December, the Atlanta field office volume increased 66%, from 452 to 751 units; the Denver field office increased 40%, from 573 to 801 units; the Philadelphia office increased 89% from 380 to 718 units; and the Santa Ana field office saw its unit volume increase 56%, from 1,056 to 1,649 units. Overall, January volume increased 59% from December, and it is the highest monthly endorsement volume since February 2019.

AAG continues to hold its lead with more than 30% of origination volume, or 1,141 endorsements. After Liberty’s uncharacteristically tiny endorsement volume in December, it bounced back with 475 endorsements in January, its strongest performance since February 2018. Reverse Mortgage Funding came in third with 361 endorsements. The top six originators each had market share exceeding 5%, with a combined market share of roughly 67%. The market has consolidated over the last 12 months; one year ago, the top six originators had a combined 62% market share.

HUD just released its December Endorsement Snapshot Report and RMF sponsored 243 loans originated by another lender. Finance of America Reverse and AAG followed with 187 and 160 such loans respectively. Fairway sold 48 loans to another sponsor in December; like other smaller players, Fairway’s production has been in a downward trend over the last 12 months.

New View Advisors continues to offer its Who Buys What From Whom (WBWFW) report as part of this endorsement report subscription. The report compiles publicly available Ginnie Mae data to show which HMBS issuers buy HECMs from which lenders. Our WBWFW report includes:

Top Originators – a ranking by original HECM UPB of all lenders over the last twelve months
WBWFW – an alphabetical cross-reference between every lender and the HMBS issuer that securitizes its loans
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 alone can show.

HECM Endorsement Analytics – December 2019

Wednesday, January 8th, 2020

HUD’s December 2019 HECM Endorsement Summary Report shows a total of 2,461 endorsements. Our summary can be found here: NV Endorsement 2019_12 WBWFW. The monthly year-over-year increase is nearly 40%; however, that metric is skewed by muted endorsement activities from December 2018 as a result of last year’s government shutdown. The December 2019 endorsement count is lower than November’s 2,842 and October’s 3,296. As discussed previously, we believe part of the increase in volume in early Q4 can be attributed to lower interest rates. Rates have increased since, and it has likely dampened December endorsement volume.

Most of the top originators have seen endorsement volume declines since October; notably, Liberty Home Equity Solutions only had 2 in December, the first time Liberty had a single digit monthly endorsement count since January 2013. Reverse Mortgage Funding had a strong month with 303 endorsements, the company’s best month since March 2018.

By regions, the Santa Ana field office had 1056 endorsements, a 4% increase over the previous 11-month average. The other field offices however, all had decreases in December. Denver, Atlanta, and Philadelphia had 8%, 20%, and 28% decreases respectively from their previous 11-month averages.

HUD also just released its November 2019 Endorsement Snapshot Report. The report shows that Finance of America Reverse sponsored 322 loans originated by another lender in November, maintaining its lead among sponsors. AAG also had a strong month with 200 sponsored loans in November. Fairway sold 75 loans to another sponsor in November. Fairway’s still the most active seller, but the number of loans sold is significantly lower than the 99 and 103 loans it sold in September and October.

We noted last month that refinanced HECMs have made a come back of late. The November Endorsement Snapshot Report shows there were 391 ‘HECM for Refinance,’ its highest level since April 2018. As a percentage it accounts for over 13% of all HECM endorsements. It is also worth noting that fixed rate HECM endorsements have been dwindling steadily since 2018Q3. For several years prior, fixed rate HECM endorsements averaged 400+ loans per month. Since June 2019, fixed rate HECM endorsements have not exceeded 85 loans per month.

New View Advisors continues to offer its Who Buys What From Whom (WBWFW) analysis as part of this endorsement report subscription. The report compiles publicly available Ginnie Mae data to show which HMBS issuers buy HECMs from which lenders. WBWFW includes:

  • Top Originators – a ranking by original HECM UPB of all lenders over the last twelve months
  • WBWFW – an alphabetical cross-reference between every lender and the HMBS issuer that securitizes its loans
  • 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 who’s buying what from whom. The dataset is more complete and timely than what endorsement analysis can show.

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.