Archive for the ‘HMBS’ Category

HMBS June 2022: June Too Soon For Swoon, But End to Boon Looms

Friday, July 1st, 2022

HECM Mortgage-Backed Securities (“HMBS”) issuance fell in June to $1.3 billion, compared to $1.5 billion in May and April’s record $1.6 billion, as the refinancing wave continues to ebb. However, production remains strong by historical standards.

Given the lag between HECM loan origination and HMBS issuance, the new HECMs backing June’s HMBS pools do not fully reflect the rapid rise in interest rates over the past several months. The numbers for July issuance will likely show further declines.

HMBS issuance totaled $13.2 billion for 2021, smashing the previous record set in 2010. With only six months in the books and over $8 billion issued, HMBS is still on pace to set another new record in 2022.

June’s original (first participation) production fell to $1.1 billion, compared to $1.2 billion in May, and well below April’s record $1.4 billion in new issuance. Still, June’s original new loan pool production was close to March, which totaled $1.13 billion, February’s $1.12 billion and January’s $1.18 billion. Approximately $823 million in original new loan pools were issued a year ago, in June 2021.

100 pools were issued in June: 53 first-participation or original pools, and 47 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 is essential for HMBS issuers to finance their monthly advances, such as borrower draws and FHA mortgage insurance premiums. Last month’s tail pool issuances totaled $220 million, within the typical range.

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

HMBS May 2022 Part II: May Too Soon To Begin Swoon Which May Loom in June

Thursday, June 9th, 2022

HMBS payoffs continued in May, as the refinancing wave refuses to ebb. Instead, May payoffs totaled $1.48 billion, just short of March’s 2022 record $1.5 billion. Outstanding HMBS rose to a record $58.3 billion with strong new issuance and a faster roll-up from rising interest rates.

HECM borrowers continue to refinance in large numbers, assisted by a higher HECM lending limit (now $970,800) and surging home prices (nearly 20% year-over-year, according to some measures). So far, rising interest rates have failed to calm this reverse mortgage refinancing wave. The nearly $1.5 billion in payoffs in May represents a 24.6% annual payoff rate.

Given the lag between HECM loan origination and HMBS issuance, the new HECMs backing May’s HMBS pools do not fully reflect the rapid rise in interest rates over the past two months. The numbers for June will test the resilience of this refinancing wave, which began with lower interest rates but continued its momentum from the strong home price appreciation and higher FHA lending limits.

2021 smashed all previous records with a $13.2 billion HMBS issuance total. 2021’s record may fall: over $7.1 billion was issued in the first five months of 2022.

Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $283 million, 22% of the total.

As a side note, this is New View Advisors’ 300th blog post since we started sharing analysis and observations about the reverse mortgage industry in 2009.  Your input and comments on any of our findings is always welcome.

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

HMBS April 2022 Part II: April May but May June?

Tuesday, May 10th, 2022

HMBS payoffs continued in April, as the refinancing wave diminished slightly but refused to ebb. Instead, April payoffs totaled $1.3 billion, just short of March 2022’s record $1.5 billion. Outstanding HMBS rose to a record $58 billion, with strong new issuance and a faster roll-up from rising interest rates.

HECM borrowers continue to refinance in large numbers, assisted by a higher HECM lending limit (now $970,800) and surging home prices (nearly 20% year-over-year, according to some measures). So far, rising interest rates have failed to calm reverse mortgage refinancings. The $1.3 billion in payoffs in April represents a 24% annual payoff rate.

However, April may be the beginning of the end of H2H refis. Given the lag between HECM loan origination and HMBS issuance, the new HECMs backing April’s HMBS pools do not fully reflect the rapid rise in interest rates over the past two months. The numbers for May and June will test the resilience of this refinancing wave, which began with lower interest rates but continued its momentum from the strong home price appreciation and higher FHA lending limits.

While 2021 surpassed all previous records with $13.2 billion HMBS issued, its record may yet fall: over $5.6 billion was issued in the first four months of 2022.
Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $256 million, 20% of the total.

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

HMBS April 2022: April Showers Bring A New Record, What May Happen Next?

Monday, May 2nd, 2022

HECM Mortgage-Backed Securities (“HMBS”) issuers set another new record in April, issuing over $1.6 billion in new HMBS. This shatters the previous mark by nearly $300 million. Refinancing continues to drive this record HMBS volume.

Given the lag between HECM loan origination and HMBS issuance, the new HECMs backing April’s HMBS pools do not fully reflect the rapid rise in interest rates over the past two months. The numbers for May and June issuance will test the resilience of this refinancing wave, which began with lower interest rates but continued its momentum from strong home price appreciation and higher FHA lending limits.

HMBS issuance totaled $13.2 billion for 2021, 22% more than the previous record set in 2010. With only four months in the books and over $5.6 billion issued, HMBS is on pace to set another new record in 2022.

April’s original (first participation) production smashed previous monthly volume records, with $1.4 billion in new issuance. This easily exceeded March’s production of original new loan pools totaling $1.13 billion, February’s $1.12 billion and January’s previous record of $1.18 billion. Approximately $900 million in original new loan pools were issued a year ago, in April 2021. Last April’s total set a record, yet this April exceeds it by half a billion dollars.

113 pools were issued in April: 67 first-participation or original pools, and 46 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 is essential for HMBS issuers to finance their monthly advances, such as borrower draws and FHA mortgage insurance premiums. Last month’s tail pool issuances totaled $217 million, within the typical range.

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

HMBS March 2022 Part II: Refi Wave Refuses To Go Quietly

Monday, April 11th, 2022

HMBS payoffs roared in like a lion in March, due to a refinancing wave that refuses to go away. March 2022 smashed previous records with $1.5 billion in payoffs. Because of these payoffs, outstanding HMBS fell to $57.59 billion, despite strong new issuance.

HECM borrowers continue to refinance in large numbers, assisted by a higher HECM lending limit (now $970,800) and surging home prices (nearly 20% year-over-year, according to some measures). So far, rising interest rates have failed to calm this reverse mortgage refinancing phenomenon. The $1.5 billion in payoffs in March represents a 27% annual payoff rate.

While 2021 easily surpassed previous annual issuance records with $13.2 billion of total HMBS issuance, 2021’s record may fall: over $4 billion was issued in the first quarter of 2022.

Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled just $254 million, a record low 17% of the total.

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

2022 Q1 HMBS Issuer League Tables – Back to (the New?) Normal

Tuesday, April 5th, 2022

AAG returned to the #1 HMBS issuer slot in 2022Q1, with $899.0 million issued and 22% market share, squeaking past FAR at #2 with $888.5 million and a 21.8% market share. Longbridge remained in third with $744.9 million issued and 18.2% market share, RMF was fourth with $735.8 million issued and 18.0% market share, and PHH rounded out the Top Five, with $583.9 million issued for a 14.3% market share.

Consistently, these same five issuers again accounted for 94% of all HMBS issuance. There were 12 active HMBS issuers in the quarter, with Nationstar out of the business and Cherry Creek Mortgage not issuing, at least for now.

2022Q1 saw $4.08 billion of HMBS issued, up 4% from last quarter’s record $3.91 billion, and the fifth consecutive quarterly issuance record. As mentioned in many of our blogs, $13.2 billion of HMBS issuance in 2021 beat 2010’s previous record $10.8 billion; at this run rate, 2022 will easily surpass 2021.

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

 

HMBS Marches On – March 2022

Friday, April 1st, 2022

HECM Mortgage-Backed Securities (“HMBS”) issuers continued their record pace in March 2022, again issuing nearly $1.4 billion in new HMBS, again almost setting a record for new original loan pools for the sixth month in row. Refinancing activity remains strong.

HMBS issuance totaled $13.2 billion for 2021, 22% more than the previous record set in 2010. With three months in the books, HMBS issuance is on pace to set a another new record in 2022.

For the past several months, original (first participation) production has been remarkably consistent. March’s production of original new loan pools totaled $1.13 billion, just above February’s $1.12 billion and consistent with January’s record $1.18 billion, December’s $1.14 billion, November’s $1.08 billion and October’s $1.07 billion. Approximately $671 million in original new loan pools were issued a year ago, in March 2021.

109 pools were issued in March: 54 first-participation or original pools, and 55 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 is essential for HMBS issuers to finance their monthly advances, such as borrower draws and FHA mortgage insurance premiums. Last month’s tail pool issuances totaled $225 million, within the typical range.

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

HMBS February 2022 Part II: Another Issuer Exits

Wednesday, March 9th, 2022

Outstanding HMBS rose to an all-time high of $57.6 billion in February 2022 as issuance outpaced another refinance-driven month of payoffs. HMBS payoffs exceeded $1 billion for the twelfth month in a row. Outstanding HMBS rose by about $288 million. Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $252 million, only 21% of the total. While falling short of January, December, and November’s record payoffs, February came close in both dollar amount and speed: just under $1.2 billion, representing a 22% annual payoff rate.

The latest Ginnie Mae data release also reveals another HMBS issuance portfolio sale: Cherry Creek Mortgage sold its $300 million HMBS portfolio to PHH Mortgage. We noted two months ago that American Advisors Group sold most of its HMBS issuance portfolio to Reverse Mortgage Funding, and Mr. Cooper Group sold its HMBS portfolio to Mortgage Assets Management, LLC (MAM). The resulting consolidation leaves the top five issuers accounting for about 93% of all outstanding HMBS.

In these strategic transactions, the purchasing issuer pays the selling issuer the present value of the issuer’s uncertificated position, which is the difference between future HECM cash flow and future HMBS cash flow. The buyer becomes the issuer of record for the purchased HMBS pools, benefiting from the excess spread of the HECM interest rate over the HMBS pass-through rate, and receives any premiums from future tail issuance. Of course, the buyer also assumes all the liabilities of an HMBS issuer: advancing Mortgage Insurance Premium (MIP), borrower draws, realized losses from claims, and many others.

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 – December 2021

Tuesday, January 11th, 2022

New View Advisors and Recursion December 2021 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 12_2021. The indices are derived from underlying HECM data in HMBS made public by Ginnie Mae, as well as private sources. This new 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.

For HMBS pools backed by adjustable rate HECMs using the Constant Maturity Treasury (CMT) index, prepayment speeds will continue to populate as more of these HMBS are issued.

HMBS December 2021 Part II: Refinancing Is the Holiday Guest That Won’t Leave

Tuesday, January 11th, 2022

Outstanding HMBS rose to an all-time high of $57.1 billion in December 2021 as record issuance outweighed another big, refinance-driven month of payoffs.

Meanwhile, extraordinary levels of both issuance and HECM loan payoffs continued. Fueled by refinancing, HMBS payoffs exceeded $1 billion for the tenth month in a row. Outstanding HMBS rose $310 million despite these near-record payoffs. As we predicted, December’s data is a disappointment for HMBS investors hoping for a prepayment slowdown. While falling short of November’s record payoffs, December came close in both dollar amount and speed: $1.28 billion, representing a 24% annual payoff rate. Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases were just $218 million, less than 18% of the total for the first time ever. Will rising interest rates finally allow investors to show their unwanted guest the door? For now, refis seem determined to stay through the New Year’s Eve party.

As we noted last week, American Advisors Group sold most of its HMBS issuance portfolio to Reverse Mortgage Funding, and Mr. Cooper Group sold its HMBS portfolio to Mortgage Assets Management, LLC (MAM). The resulting consolidation leaves the top five issuers accounting for more than 93% of all outstanding HMBS.

According to Ginnie Mae data, AAG was listed in October as the issuer of record for 1,529 HMBS pools totaling $13.1 billion. At yearend, AAG is listed for just 55 pools totaling $1.6 billion. Reverse Mortgage Funding is now the issuer of record for over 3,800 pools totaling $23.5 billion, more than 41% of all outstanding HMBS. The December month end Ginnie Mae data release reflects the Mr. Cooper/MAM sale, removing Mr. Cooper from the HMBS issuance ranks.

In these strategic transactions, the purchasing issuer pays the selling issuer the present value of the issuer’s uncertificated position, which is the difference between future HECM cash flow and future HMBS cash flow. The buyer becomes the issuer for the purchased HMBS pools, benefiting from the excess spread between the HECM interest rate and the HMBS pass-through rate, and any premiums from future tail issuance. Of course, the buyer also assumes the liabilities of an HMBS issuer: advancing Mortgage Insurance Premium (MIP), borrower draws, realized losses from claims, and many others.

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