Archive for the ‘HMBS’ Category

HMBS December 2019 Part II: Bye Bye (Peak) Buyout

Friday, January 10th, 2020

Outstanding HMBS rose $137 million in December, as lower payoffs were balanced by a strong issuance month, including seasoned new issuance. Payoffs totaled just over $950 million, about the same as November. Total outstanding HMBS now stands at just over $54 billion. For now, supply is in equilibrium, with new issuance and interest roll-up roughly equal to payoffs.

The direction of total HMBS float is now hard to predict given further trends. HMBS issuance in the first half of 2019 was the lowest six months of issuance in five years. In 2019, HMBS also posted the lowest annual total in five years. However, low interest rates and now a higher lending limit have boosted production significantly, while Mandatory Buyouts continue to fall. How long can this equilibrium last?

We predicted continuing declines in Mandatory Buyouts and December was a case in point, with buyout dollar volume at its lowest level in nearly 4 years. “Peak Buyout” was an echo of the peak issuance from 2009 through the first half of 2013. Much of this production has already been repurchased by the issuers or repaid by borrowers. From now on, billion-dollar-plus payoff months will be the exception rather than the rule. Many HECM loans continue to reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”), but Peak Buyout is long gone.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases totaled $476 million, or 51% of the total, the lowest percentage in almost 5 years. This continues the downward trend from the buyout peak in the third quarter of 2018, 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.

HMBS December 2019: Stocking Half Full in 2018? Then Hang Two Stockings This Year

Friday, January 3rd, 2020

HMBS issuance totaled $908 million in December 2019, as lower rates continued to strengthen new production. 92 pools were issued in December, including about $484 million of new unseasoned HECM first participation pools, maintaining the high monthly total for new production this year. This month’s total was also helped by two large seasoned new issues, including a CMT-indexed pool. For comparison, HMBS issuers sold 95 pools totaling $619 million in December 2018.

Reverse mortgage lenders weathered a long period of reduced new origination volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of FY2018. Yet, with this month’s issuance, the HMBS market totaled about $8.3 billion for calendar year 2019. HMBS issuance totaled $9.6 billion in 2018 and $10.5 billion in 2017. However, securitization of private reverse mortgages was much higher than previous years. As a result, we estimate that the total issuance of reverse mortgage securities backed by new collateral was about the same as 2018.

Some other trends to watch in 2020:

What happens to LIBOR?
The industry relies heavily on the 12-month LIBOR index for its adjustable rate HECMs. LIBOR is scheduled to go away in 2021, and the plan to replace this index is not clear.

What happens to HECM?
HUD has already hinted at further change. Despite significant improvements in HECM performance over the last several years, restrictions on HECM to HECM refinancing and county level MCA limits are on the table. Are lower Principal Limit Factors also looming?

Will private reverse mortgage production surpass HECMs?
Private reverse mortgages, most of them jumbo-sized, now make up more than 25% of new origination by dollar volume. As HECM is cut back and new private products are introduced, can private RMs surpass HECM as the industry’s main product?

December’s production of original new loan pools was about $484 million, compared to $506 million in November, $426 million in October, $393 million in September, $390 million in August, and $321 million in July. Last month’s tail pool issuances totaled $220 million, within the range of recent tail issuance.
December 2019 issuance divided into 33 First-Participation or 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. 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.

HMBS November 2019 Part II: HMBS Float in Equilibrium at $54 Billion

Tuesday, December 10th, 2019

Outstanding HMBS fell by $33 million in November, as lower payoffs were balanced by a strong issuance month. Payoffs totaled just under $928 million, the lowest amount in 9 months. Total outstanding HMBS fell to about $53.9 billion, a three-year low, but scarcely different from last month’s total. This is only the second month HMBS float has been less than $54 billion since May 2016.

After months of decline, the direction of total HMBS float is now hard to predict, given further trends. HMBS issuance in the first half of 2019 was the lowest half of issuance in five years. With one month to go, HMBS issuance figures to post the lowest annual total in five years. However, low interest rates and now a higher lending limit have boosted production significantly, while Mandatory Buyouts continue to fall. This month, the float appears to be in equilibrium, but can that last?

We predicted continuing declines in Mandatory Buyouts and November was a case in point with buyouts at their lowest level in over 3 years. “Peak Buyout” was an echo of the peak issuance from 2009 through the first half of 2013. Much of this production has already been repurchased by issuers or repaid by borrowers. From now on, billion-dollar-plus payoff months will be the exception rather than the rule. Many HECM loans continue to reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”), but Peak Buyout is over.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases totaled $517 million, or 56% of the total. This continues a gradual downward trend from the buyout peak in the third quarter of 2018, 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 2019: Issuers Give Thanks for Abundant HMBS Harvest

Thursday, December 5th, 2019

HMBS issuance totaled $732 million in November 2019, as lower rates continued to strengthen new production. 89 pools were issued in November, including about $506 million of new unseasoned HECM first participation pools, easily the highest monthly total for new production this year, and the fourth straight monthly increase. For comparison, HMBS issuers sold 84 pools totaling $522 million in November 2018.

Reverse mortgage lenders weathered a long period of reduced new origination volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of FY2018. Yet, with this month’s issuance, the HMBS market is on track to total about $8 billion for calendar year 2019. HMBS issuance totaled $9.6 billion in 2018, and $10.5 billion in 2017.

November’s production of original new loan pools was about $506 million, compared to $426 million in October, $393 million in September, $390 million in August, $321 million in July, $331 million in June, $325 million in May, $300 million in April, $277 million in March, $274 in February, and $304 million in January. Last month’s tail pool issuances totaled $225 million, within the range of recent tail issuance. As predicted last quarter, we are seeing the benefit of lower interest rates helping new origination volume.

November 2019 issuance divided into 35 First-Participation or Original pools and 54 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.

HMBS October 2019 Part II: HMBS Float Drops Below $54 Billion

Monday, November 11th, 2019

Outstanding HMBS fell by $180 million in October, as continued strong payoffs outweighed a solid issuance month. Payoffs once again totaled just under $1 billion. Total outstanding HMBS fell to $53.9 billion, a three-year low. This is the first month HMBS float has been less than $54 billion since May 2016.

Total HMBS float will likely fall further given current trends. HMBS issuance in the first half of 2019 was the lowest half of issuance in five years. With two months to go, HMBS issuance figures to post the lowest annual total in five years.

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

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $536 million, or about 54%, of the payoffs last month. This percentage represents a three year low and continues a gradual downward trend from the buyout peak in the third quarter of 2018, 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.

Mr. October Comes Through for Team HMBS

Friday, November 1st, 2019

HMBS issuance totaled $642 million in October 2019, as lower rates continued to strengthen new production. 82 pools were issued in October, including about $426 million of new unseasoned HECM first participation pools, the highest monthly total for new production this year, and the fourth straight monthly increase.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of fiscal year 2018. Even with this month’s issuance, the HMBS market will be hard pressed to equal last year’s totals. For the entire year of 2018, HMBS issuance totaled about $9.6 billion, and $10.5 billion in 2017. HMBS issuers sold 99 pools totaling $1.018 billion in October 2018.

October’s production of $426 million of original new loan pools surpasses $393 million in September, $390 million in August, $321 million in July, $331 million in June, $325 million in May, $300 million in April, $277 million in March, $274 in February, and $304 million in January. Last month’s tail pool issuances totaled $216 million, on the low end of the range for recent tail issuance. As predicted, we are likely seeing the benefit of lower interest rates helping new origination volume.

October 2019 issuance divided into 34 First-Participation or Original pools and 48 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.

HMBS September 2019 Part II: HMBS Float Falls Again

Wednesday, October 9th, 2019

Outstanding HMBS fell by $182 million in September, as strong payoffs outweighed a decent issuance month. Payoffs once again totaled just under $1 billion. Total outstanding HMBS fell to just over $54.1 billion.

Total HMBS float will likely fall further given current trends. HMBS issuance in the first half of 2019 was the lowest half of issuance in five years.

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

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA Mandatory Purchases accounted for $561 million, or about 59%, of the payoffs last month. This percentage represents a 21-month low and continues a gradual downward trend from the buyout peak in last year’s 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.

2019Q3 HMBS Issuer League Tables – Two Can Play That Game

Wednesday, October 2nd, 2019

AAG remains the frontrunner HMBS issuer for the third quarter of 2019, with $1.38 billion of issuance and 23% market share. Note AAG’s totals are all new originations, with no highly seasoned pools issued. Longbridge took sole possession of second place with $1.29 billion of issuance and a 21.5% share. Longbridge’s rise in the rankings is attributable in large part to a spate of highly seasoned pool issuance during the quarter. RMF previously made similar leaps in the league tables with their seasoned pool issuances. As a result of Longbridge’s surge, RMF was pushed to third with $1.11 billion issued and 18.6% market share, FAR moved down a notch to fourth with $855.2 million issued and 14.3% market share, and PHH Mortgage Corp placed fifth with $665.8 million and 11.1% market share. These five issuers accounted for 88.5% of all issuance, up from 2019Q2’s 83%, and back near the Top-5 concentration high of 91% at year-end 2018. There were 13 active HMBS issuers during the quarter. Live Well Financial is gone, and one-time issuer Synergy One Lending did not issue securities in the quarter.

2019Q3 saw $2.33 billion of HMBS issued, up from both Q2’s $1.98 billion and Q1’s $1.67 billion. For the first nine months, industry volume is off 19% from a year ago. Total HMBS issuance in the first nine months of 2018 was $7.43 billion. Even with highly seasoned pool issuance, expect lower HMBS issuance volume going forward.

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

HMBS August 2019: Issuance Does Not Take a Vacation

Tuesday, September 3rd, 2019

HMBS issuance totaled $637 million in August, as lower rates strengthened new production. 93 pools were issued in August, including about $390 million of new unseasoned HECM first participation pools, the highest monthly total for new production this year. There were no highly seasoned pools issued.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of Fiscal Year 2018. For the 2018 calendar year, HMBS issuance totaled about $9.6 billion, compared to $10.5 billion in 2017. Even with this month’s issuance, the HMBS market will be hard pressed to equal last year’s totals. HMBS issuers sold 110 pools totaling $580 million in August 2018.

August’s production of original new loan pools was about $390 million, compared to $321 million in July, $331 million in June, $325 million in May, $300 million in April, $277 million in March, $274 in February, and $304 million in January. Last month’s tail pool issuances totaled $243 million, on the high end of the range of recent tail issuance. As predicted last month, we are seeing the benefit of lower interest rates helping new origination volume.

August 2019 issuance divided into 32 First-Participation or Original pools and 61 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.

HMBS July 2019 Part II: HMBS Float Rises

Friday, August 9th, 2019

Outstanding HMBS rose by nearly $300 million in July, helped by a large new pool backed by highly seasoned Home Equity Conversion Mortgages (“HECMs”). Payoffs once again totaled just under $1 billion. Total outstanding HMBS rose to just under $54.5 billion. Without that one pool, HMBS float would have fallen below $54 billion for the first time in over 3 years.

Total HMBS float will likely finally fall further given current trends. HMBS issuance in the first half of 2019 was the lowest half of issuance in five years.

We also predict continuing declines in Mandatory Buyouts in the foreseeable future. “Peak Buyout” was 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 will be the exception rather than the rule. Many HECM loans continue to reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”), but Peak Buyout appears to have ended.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $610 million, or about 61%, of the payoffs last month. This continues a gradual downward trend from the buyout peak in last year’s 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.