Archive for the ‘HMBS’ Category

HMBS August 2023 Part II: Slump Sustained

Wednesday, September 13th, 2023

HMBS payoffs increased in August, as Mandatory Purchases continued to rise and natural payoffs increased to approximately 8.2% per annum. August payoffs totaled about $980 million. Outstanding HMBS fell for the seventh month in a row and is now under $59 billion for the first time in a year due to continued weak issuance.

Higher interest rates finally caught up with the HMBS market in 2022, driving down Principal Limit Factors (initial loan-to-value ratios or “PLFs”) sharply. Big trouble came in the fourth quarter. In October, the trend of declining home prices became more clear and widespread. In November, Reverse Mortgage Funding (“RMF”), holder of the largest HMBS servicing portfolio, declared bankruptcy. In December, AAG, the top HECM originator, agreed to sell its assets to Finance of America Reverse, taking another major HMBS issuer out of the picture.

Also in December, Ginnie Mae took over RMF’s HMBS portfolio. In Ginnie Mae’s recent data release, “Ginnie Mae – Reverse Mortgage Funding 42” is now shown as the issuer of record for 4,042 former RMF pools. About $339 million of Issuer 42’s portfolio paid off in August. “Issuer 42” HMBS accounts for just over $19 billion, or about 32% of all outstanding HMBS.

Issuer 42 is not issuing any tail pools. We estimate Issuer 42 has an approximate $900 million uncertificated position, that is, the excess of their portfolio’s HECM asset balance over the balance of their HMBS liability. So far Ginnie Mae’s position is like Fannie Mae’s HECM portfolio, a big melting iceberg which has dwindled from $75 billion to less than $5 billion today, more than a decade after Fannie bought her last HECM.

The lending limit/MCA was raised to $1,089,300 in 2023; so far this has not prevented a significant decline in industry volume. Higher interest rates and slowing home price appreciation will challenge the HMBS market for the foreseeable future.

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, 56% of HMBS payoffs last month were due to Mandatory Purchase, totaling about $550 million, continuing a trend of rising HMS buyouts and HECM assignments to HUD.

Including the Mandatory Purchases, HMBS paid off at an 18.8% annual rate in August, and 16.9% over the last 12 months. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly over the past twelve months. Natural payoffs (those other than Mandatory Purchases) for the 12 month period ending 8/31/2023 were 7.9% per-annum compared to 17.5% for the prior 12 month period.

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

HMBS August 2023: I Know What You Didn’t Do Last Summer

Friday, September 1st, 2023

The HMBS new issue market improved over July with a small rebound in August, but overall it’s been a bad summer. HECM Mortgage-Backed Securities (“HMBS”) issuance totaled $572 million in August, up from July’s $518 million. 97 pools were issued, low by historical standards.

On November 30 of last year, Reverse Mortgage Funding (“RMF”), the largest HMBS issuer of record, filed for bankruptcy. As a result, Ginnie Mae acquired RMF’s HMBS portfolio. Ginnie Mae/RMF (aka “Issuer 42”) issued no HMBS pools in July.

On March 31, American Advisors Group was purchased by Finance of America (“FAR”), continuing the industry’s consolidation, leaving four issuers with approximately 90% total market share. Last month, FAR was the top issuer with $228 million; Longbridge was the only other issuer to top $100 million.

HMBS issuance set a new record in 2022, with nearly $14 billion issued. In 2023, HMBS issuers will not come anywhere near those numbers; the first eight months totaled approximately $4.3 billion.

August’s original (first participation) production of $391 million was up 17% from July’s weak $335 million, and more in line with June’s $384 million, May’s $353 million, and April’s $379 million. Most of August’s increase in first-participation issuance was a function of a $60 million increase from FAR. August new issuance was very weak by historical standards, less than half of August 2022’s $988 million.

The 97 pools issued in August consisted of 24 first-participation or original pools and 73 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 $181 million, below the typical range.

Notable in the August HMBS issuance data are the 26 pools with aggregate pool size less than $1,000,000. Issuers are taking advantage of the new provision from Ginnie Mae to issue smaller pools, designed to provide warehouse financing relief to Issuers.

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

HMBS July 2023 Part II: Summer Doldrums

Wednesday, August 9th, 2023

HMBS payoffs fell in July, as Mandatory Purchases continued to rise and natural payoffs fell to approximately 8% per annum.  July payoffs totaled about $950 million. Outstanding HMBS fell for the sixth month in a row to just over $59.1 billion due to weak issuance.

As is widely known, Ginnie Mae took over RMF’s HMBS portfolio in December. In Ginnie Mae’s recent data release, “Ginnie Mae – Reverse Mortgage Funding 42” is now shown as the issuer of record for 4,044 former RMF pools. About $340 million of Issuer 42’s portfolio paid off in July. “Issuer 42” HMBS accounts for just under $19.3 billion, or about 33% of all outstanding HMBS.

Issuer 42 is not issuing any tail pools. We estimate Issuer 42 has an approximate $800 million uncertificated position, that is, the excess of their portfolio’s HECM asset balance over the balance of their HMBS liability. So far Ginnie Mae’s position is like Fannie Mae’s HECM portfolio, a big melting iceberg which has dwindled from $75 billion to less than $5 billion today, more than a decade after Fannie bought her last HECM.

The lending limit/MCA was raised to $1,089,300 in 2023; so far this has not prevented a significant decline in industry volume. Higher interest rates and slowing home price appreciation will challenge the HMBS market for the foreseeable future.

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, 58% of HMBS payoffs last month were due to Mandatory Purchase, totaling about $541 million, continuing a trend of rising HMS buyouts and HECM assignments to HUD.

Including the Mandatory Purchases, HMBS paid off at an 17.8% annual rate in July, and 17.0% over the last 12 months, the lowest annual rate in more than six years. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly over the past twelve months.  HMBS payoffs resulting from underlying HECM loan payoffs, including payoffs due to mortality and refinancing, is about 8%, under its long-term average.

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

HMBS July 2023: Fireworks Fizzle in Market Without Sizzle

Tuesday, August 1st, 2023

The HMBS new issue market posted a weak tally in July 2023 as both tail issuance and new loan production declined. HECM Mortgage-Backed Securities (HMBS) issuance totaled $518 million in July, down significantly from June’s $589 million. 87 pools were issued, also low by historical standards.

On November 30 of last year, Reverse Mortgage Funding (RMF), the largest HMBS issuer of record, filed for bankruptcy. As a result, Ginnie Mae acquired RMF’s HMBS portfolio. Ginnie Mae/RMF (aka Issuer 42) issued no HMBS pools in July.

On March 31, AAG was purchased by Finance of America (FAR), continuing the industry’s consolidation, leaving four issuers with approximately 90% total market share. Last month, FAR was the top issuer with $178 million, and Longbridge was the only other issuer to top $100 million.

HMBS issuance set a new record in 2022, with nearly $14 billion issued. In 2023, HMBS issuers will not come anywhere near those numbers; the first seven months totaled just over $3.7 billion.

July’s original (first participation) production of $335 million was down sharply from June’s $384 million, May’s $353 million, and April’s $379 million. July was very weak by historical standards, barely one-third of July 2022’s $1.2 billion in new issuance.

The 87 pools issued in June consisted of 22 first-participation or original pools and 65 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 $182 million, below the typical range.

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

HMBS June 2023 Part II: June Gloom

Monday, July 17th, 2023

HMBS payoffs rose in June as Mandatory Purchases continued to rise, and natural payoffs fell slightly to just under 9% per annum. June payoffs totaled about $1 billion. Outstanding HMBS fell for the fifth month in a row to just under $59.3 billion due to weak issuance.

Higher interest rates finally caught up with the HMBS market in 2022, driving down Principal Limit Factors (initial loan-to-value ratios or “PLFs”) sharply. Big trouble came in the fourth quarter. In October, the trend of declining home prices became more clear and widespread. In November, Reverse Mortgage Funding (“RMF”), holder of the largest HMBS servicing portfolio, declared bankruptcy. In December, AAG, the top HECM originator, agreed to sell its assets to Finance of America Reverse, taking another major HMBS issuer out of the picture.

Also in December, Ginnie Mae took over RMF’s HMBS portfolio. In Ginnie Mae’s recent data release, “Ginnie Mae – Reverse Mortgage Funding 42” is now shown as the issuer of record for 4,045 former RMF pools. About $350 million of Issuer 42’s portfolio paid off in June. “Issuer 42” HMBS accounts for about $19.5 billion, or approximately 33% of all outstanding HMBS.

Issuer 42 is not issuing any tail pools. After nearly four months, we estimate Issuer 42 has an approximate $700 million uncertificated position, that is, the excess of their portfolio’s HECM asset balance over the balance of their HMBS liability.

The lending limit/MCA was raised to $1,089,300 in 2023; so far this has not prevented a significant decline in industry volume. Higher interest rates and slowing home price appreciation will challenge the HMBS market for the foreseeable future.

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, 54% of HMBS payoffs last month were due to Mandatory Purchase, totaling about $522 million, continuing a trend of rising HMS buyouts and HECM assignments to HUD.

Including the Mandatory Purchases, HMBS paid off at an 18.3% annual rate in June, slightly higher than May. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly. HMBS payoffs resulting from underlying HECM loan payoffs, including payoffs due to mortality and refinancing, is just under 9%, consistent with its long-term average.

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

2023 First Half HMBS Issuer League Tables

Thursday, July 6th, 2023

FAR kept its grip as lead HMBS issuer with $1.23 billion issued and 38.8% market share. Longbridge was again second, with $693.3 million issued and 21.8% market share, PHH stayed at third with $502.3 million issued and 15.8% market share, and Mutual of Omaha was fourth with $397.2 million issued and 12.5% market share. The Top Four issuers accounted for 89% of all HMBS issuance in the half.

2023Q2 saw $1.703 billion issued, up from Q1’s $1.472 billion, but a run rate of still only about $6 billion for calendar year 2023, less than half of 2022’s nearly $14 billion record issuance tally. Both Money House and Money Source returned to issuance in Q2, bringing the number of HMBS issuers back to 11 for the half, but they accounted for just 0.2% of all issuance.

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

HMBS June 2023: June Swoon In Tune With Industry Gloom

Thursday, July 6th, 2023

The HMBS new issue market posted its biggest month of 2023, but once again that’s not saying much. Strong tail issuance masked a decline in new loan production. HECM Mortgage-Backed Securities (“HMBS”) issuance totaled $588 million in June, just topping May’s $580 million. 89 pools were issued, low by historical standards.

On November 30 of last year, Reverse Mortgage Funding (“RMF”), the largest HMBS issuer of record, filed for bankruptcy. As a result, Ginnie Mae acquired RMF’s HMBS portfolio. Ginnie Mae/RMF (aka “Issuer 42”) issued no HMBS pools in June.

On March 31, American Advisors Group was purchased by Finance of America (“FAR”), continuing the industry’s consolidation, leaving four issuers with approximately 90% total market share. Last month, FAR was the top issuer with $195 million.

HMBS issuance set a new record in 2022, with nearly $14 billion issued. In 2023, HMBS issuers will not come anywhere near those numbers; the first six months totaled just over $3 billion.

June’s original (first participation) production of $384 million was the most this year, better than May’s $353, April’s $379 million, March’s anemic $259 million, February’s $322 million, and January’s $347 million. Still, June was very weak by historical standards, less than one-third of June 2022’s $1.1 billion in new issuance.

The 89 pools issued in June consisted of 27 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 $204 million, within the typical range.

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

HMBS May 2023 Part II: More of the Same

Monday, June 12th, 2023

HMBS payoffs rose in May, as Mandatory Purchases continued to rise, and natural payoffs rose to more than 9% per annum. May payoffs totaled about $970 million. Outstanding HMBS fell slightly to $59.4 billion due to the weak issuance and uptick in payoffs.

As mentioned in past blogs, Ginnie Mae took over RMF’s HMBS portfolio in December. Ginnie Mae’s recent data release shows “Ginnie Mae – Reverse Mortgage Funding 42” as the issuer of record for 4,046 former RMF pools. About $200 million of Issuer 42’s portfolio paid off in May. “Issuer 42” HMBS accounts for just under $20 billion, or about 33% of all outstanding HMBS.

Issuer 42 is not issuing any tail pools. After nearly four months, we estimate Issuer 42 has an approximate $600 million uncertificated position, that is, the excess of their portfolio’s HECM asset balance over the balance of their HMBS liability. So far Ginnie Mae’s position is like Fannie Mae’s HECM portfolio, a big melting iceberg which has dwindled from $75 billion to less than $5 billion today, more than a decade after Fannie bought her last HECM.

The lending limit/MCA was raised to $1,089,300 in 2023; so far this has not prevented a significant decline in industry volume. Higher interest rates and slowing home price appreciation will challenge the HMBS market for the foreseeable future.

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, 53% of HMBS payoffs last month were due to Mandatory Purchase. Last month’s 98% MCA Mandatory Purchases totaled about $515 million, continuing a trend of rising HMS buyouts and HECM assignments to HUD.

Including the Mandatory Purchases, HMBS paid off at an 18% annual rate in May, slightly higher than April. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly. HMBS payoffs resulting from underlying HECM loan payoffs, including payoffs due to mortality and refinancing, is about 9%, consistent with its long-term average.

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

HMBS May 2023: Slouching Round the Maypole

Thursday, June 1st, 2023

The HMBS new issue market posted its biggest month of 2023, but that’s not saying much. Strong tail issuance masked a decline in new loan production. HECM Mortgage-Backed Securities issuance totaled $580 million in May, topping April’s $534 million. 82 pools were issued, low by historical standards.

On November 30 of last year, Reverse Mortgage Funding, the largest HMBS issuer of record, filed for bankruptcy. As a result, Ginnie Mae acquired RMF’s HMBS portfolio. Ginnie Mae/RMF aka Issuer 42 issued no HMBS pools in May.

On March 31, American Advisors Group was purchased by Finance of America Reverse, continuing the industry’s consolidation, leaving four issuers with approximately 90% total market share. Last month, FAR was the top issuer with $200 million.

HMBS issuance set a volume record in 2022, with nearly $14 billion issued. HMBS issuers are very unlikely to come anywhere near those numbers in 2023; the first five months totaled just over $2.5 billion.

May’s original (first participation) production of $353 million fell from April’s $379 million, but it was better than March’s anemic $259 million, February’s $322 million, and January’s $347 million. Still, May was very weak by historical standards, less than one-third of May 2022’s $1.2 billion in new issuance.

The 82 pools issued in May consisted of 20 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 $226 million, above the typical range. This is likely an echo of April 2022’s record issuance, as the draw restrictions on many year-old HECMs expired.

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

HMBS April 2023 Part II: Still Waiting For … Oh Never Mind

Tuesday, May 9th, 2023

HMBS payoffs fell in April, as Mandatory Purchases continued to rise and natural payoffs fell to less than 8% per annum. April payoffs totaled about $900 million, within the range of recent months. Outstanding HMBS fell slightly to $59.5 billion due to continued weak issuance.

Higher interest rates finally caught up with the HMBS market in 2022, driving down PLFs sharply. Big trouble came in the fourth quarter with the trend of declining home prices became more clear and widespread, RMF declaring bankruptcy, AAG selling its assets to FAR, and Ginnie Mae taking over RMF’s HMBS portfolio. In Ginnie Mae’s recent data release, “Ginnie Mae – Reverse Mortgage Funding 42” is now shown as the issuer of record for the 4,046 former RMF pools. About $300 million of Issuer 42’s portfolio paid off in April. Issuer 42 HMBS accounts for just over $20 billion, or just under 34% of all outstanding HMBS.

Might an “Issuer 43” take over this portfolio, or will it be a big melting iceberg like Fannie Mae’s HECM portfolio? Fannie Mae’s portfolio has dwindled from $75 billion to approximately $5 billion today, more than a decade after Fannie bought her last HECM. At a certain point, Issuer 42’s net cash flow will turn positive, with net loan payoffs exceeding borrower credit line draws and other advances. When that point is reached, Ginnie Mae might be tempted to follow her stepsister’s example, and be content to let its HMBS portfolio run off over several years.

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, 56% of HMBS payoffs last month were due to Mandatory Purchase. Last month’s 98% MCA Mandatory Purchases totaled $507 million, the highest dollar total in over 3 years.

Including the Mandatory Purchases, HMBS paid off at a 17.0% annual rate in April, down from March’s 17.8% pace. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly. HMBS payoffs resulting from underlying HECM loan payoffs, including payoffs due to mortality and refinancing, is about 7.4%, compared to 18.4% a year ago.

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