Archive for the ‘HMBS’ Category

February 2019 Part II: HMBS Still Can’t Drive … 55 (Billion)

Tuesday, March 12th, 2019

HMBS float fell as predicted to less than $55 billion in February as payoffs continue to outweigh falling issuance. Once again with just over $900 million in payoffs, and a continued drought of new issuance, total outstanding HMBS ended the month at $54.8 billion, down over $225 million from January. HMBS float has been range-bound between just under $55 billion to $57 billion for over two years. Total HMBS float will likely fall further given current trends.

As noted last week, HMBS issuance was only about $490 million in January, with no highly seasoned new issuance.

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 or repaid by borrowers. From now on, billion-dollar-plus payoff months will be the exception rather than the rule. Although many loans continue to reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”), Peak Buyout appears to have ended.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $638 million, or about 71%, 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.

February 2019: Groundhog Day for HMBS Market – Long Winter Ahead?

Friday, March 1st, 2019

HMBS issuance fell in February 2019 to just under $491 million, the lowest issuance level in nearly 5 years. February issuance was consistent with the sharply lower issuance trend of recent months, made even weaker due to February’s low day count and lack of any highly seasoned pools. 82 pools were issued in February, including nearly $274 million of new, first participation pools. HMBS float shrinkage will continue as February’s payoffs are almost certain to outweigh new issuance and interest roll-up.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of Fiscal Year 2018. For the entire year of 2018, HMBS issuance totaled about $9.6 billion, compared to $10.5 billion in 2017. The HMBS market will be hard pressed to equal last year’s totals, which included some HMBS issuance backed by new HECM loans originated at higher PLFs.

Production of original new loan pools was about $274 million, down from $304 million in January and $277 million in December, and well below the $360 million issued in September 2018. Last month’s tail pool issuances totaled $217 million, within the range of recent tail issuance. By comparison, HMBS issuers sold 129 pools totaling $1.47 billion in February 2018.

February 2019 issuance divided into 35 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 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.

January 2019 Part II: HMBS Can’t Drive … 55 Billion

Monday, February 11th, 2019

HMBS float fell again in January as big payoffs continued to outweigh falling issuance. With just over $900 million in payoffs, total outstanding HMBS ended the month at $55.031 billion, down about $100 million from December. While HMBS float has been range-bound between $55 billion and $57 billion for over two years, it will likely fall below $55 billion by the end of February.

As noted last week, HMBS issuance was only about $614 million in January, including one highly seasoned new issue.

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 or repaid by borrowers. From now on, billion-dollar-plus payoff months will be the exception rather than the rule. Although many loans continue to reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”), Peak Buyout appears to have ended.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $637 million, or about 69%, of the payoffs last month. This continues a generally 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.

January 2019: HMBS Market Imitates Super Bowl with Low Scoring Month

Tuesday, February 5th, 2019

HMBS issuance fell in January 2019 to just under $614 million, despite help from one highly seasoned pool of original collateral. January issuance was very similar to recent months’ weak numbers, which were among the lowest issuance levels in over four years. 97 pools were issued in January, including just over $300 million of new first participation pools. HMBS float shrinkage will continue as January’s prepayments are almost certain to outweigh new issuance and interest roll-up.

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 entire year of 2018, HMBS issuance totaled about $9.6 billion, compared to $10.5 billion in 2017. The HMBS market will be hard pressed to equal last year’s totals, which also included HMBS issuance backed by new HECM loans originated at higher PLFs.

Production of original new loan pools was about $304 million, up from last month’s $277 million, and November’s $298 million, but below October’s $325 million and $360 million in September. Last month’s tail pool issuances totaled $259 million, within the range of recent tail issuance. By comparison, HMBS issuers sold 111 pools totaling $869 million in January 2018.

January 2019 issuance divided into 36 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.

December HMBS 2018 Part II: Fixed A-Fixin’ For Extinction (Or At Least Constriction) Due To HUD Restrictions

Thursday, January 10th, 2019

HMBS float fell again in December as big payoffs continued to outweigh falling issuance.  With just over $900 million in payoffs, total outstanding HMBS ended the month at $55.1 billion, down from about $55.3 billion at the end of November.  HMBS float has been range-bound between just under $55 billion to $57 billion for over two years.

Fixed Rate HMBS, which once reigned as King of all HMBS Product Types, has shrunk to just over $13 billion in outstanding float, down from $19.1 billion at year-end 2017 and $24.8 billion at the end of 2016.  Barely $1 billion in fixed rate HMBS was issued in 2018. This is the result of HECM program changes that severely restricted the full Principal Limit initial borrowing, the staple of fixed rate HECM.

As noted last week, HMBS issuance was only about $619 million in December, including a few highly seasoned new issues.

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

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $625 million, or about 68%, of the payoffs last month.  This is down $40 million from November, and continues a generally downward trend from the 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.

2018 HMBS Issuer Rankings – RMF Surges Ahead

Thursday, January 3rd, 2019

RMF was the #1 start-to-finish HMBS issuer in 2018, responsible for $3.92 billion of HMBS securities, a whopping 41% market share, well ahead of second place AAG’s 20% share. RMF’s tally includes approximately $600 million of HMBS it purchased from Live Well Financial in November. AAG issued $1.91 billion of HMBS for the year, virtually all new issuance and tails. FAR stays in third with $1.34 billion issued and 14% market share. Ocwen Loan Servicing and Longbridge Financial round out the top five issuers. Ocwen issued $728.7 million for a 10% market share, and Longbridge was fifth with $599 million issued for a 6% market share. This is Longbridge Financial’s first appearance in the Top Five. These five issuers accounted for almost 92% of all issuance, a record. There were 14 active HMBS issuers last quarter – only Bank of America did not issue HMBS in Q4 (or Q3).

2018 saw nearly $9.6 billion of HMBS issued, with Q4 issuance at $2.2 billion. For comparison, total HMBS issuance volume in 2017 equaled $10.5 billion. Thank a 2018 total of highly seasoned issuance from RMF of nearly $2.2 billion for the relatively strong issuance totals. However, as previously noted, unless highly seasoned pool issuance continues, expect lower volume going forward. Tail issuance continues to provide volume (and profit) stability to HMBS issuers to offset the new issue slowdown. Of 2018’s issuance, $2.7 billion was from tails.

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

December 2018 HMBS: Mostly Coal in the Stocking, Annual Issuance Falls Over $900 Million

Wednesday, January 2nd, 2019

HMBS issuance rose in December 2018 to just over $619 million, helped by three highly seasoned pools of original collateral. Without those three issues, December issuance was very similar to November’s weak numbers, which were the lowest issuance level in over four years. Just 95 pools were issued in December. Less than $300 million of new first participation pools were issued. Additional shrinkage in HMBS float seems likely this month.

For the entire 2018 calendar year, HMBS issuance totaled about $9.6 billion, compared to $10.5 billion in 2017. The various headwinds facing the market, higher interest rates, lower PLFs, etc., will probably reduce volume further in 2019.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the new lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Mortgages (“HECMs”) effective last Fiscal Year.

Production of original new loan pools was just under $277 million, down from November’s $298 million, October’s $325 million and $360 million in September. December’s tail pool issuances totaled $237 million, within the range of recent tail issuance. By comparison, HMBS issuers sold 106 pools totaling $1.3 billion in December 2017.  After last month’s portfolio sale, Live Well Financial was back in the market, issuing approximately $46 million of HMBS.

December 2018 issuance divided into 39 original pools and 56 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.

November 2018 HMBS Part II: Market Shrinkage Continues; LiveWell Portfolio Sold; Peak Buyout Ends

Tuesday, December 11th, 2018

HMBS float fell in November as big payoffs continued to outweigh falling issuance. With just under $1 billion in payoffs, total outstanding HMBS ended the month at $55.3 billion, down from about $55.5 billion at the end of October. HMBS float has been range-bound between just under $55 billion to $57 billion for over two years.

As we noted last week, HMBS issuance was only $521 million in November, with no highly seasoned new issuance. However, the usual issuer of highly seasoned original pools was not idle during November. The Ginnie Mae data reveals Reverse Mortgage Funding bought Live Well Financial’ s issuance portfolio totaling just over $4 billion. That gives RMF an outstanding portfolio of almost $12.7 billion, surpassing Nationstar Mortgage as the top issuer portfolio.

Although many loans continue to reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”), Peak Buyout appears to have ended. Peak Buyout is 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 should be the exception rather than the rule.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $665 million, or about 70% of the payoffs last month. This continues a general downward trend from the 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.

November 2018 HMBS: Looking For Mr. Good Nadir

Tuesday, December 4th, 2018

HMBS issuance fell in November 2018 to just over $521 million, the lowest issuance level in over four years. In all, 84 pools were issued in November, the fewest since February 2015. Further shrinkage in HMBS float seems inevitable. Where is the bottom? Last summer a garden of hopeful metaphors bloomed, in which Bouncing Dead Cats Turned the Corner just in time to witness the Nadir of the HECM. But the market has yet to find its new normal.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the new lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Mortgages (“HECMs”) effective last year. Rising interest rates will not help either, as they generally require lower PLFs.

Production of original new loan pools was just under $298 million, down from October’s $325 million and $360 million in September. Last month’s tail pool issuances totaled $224 million, within the range of recent tail issuance. By comparison, HMBS issuers sold 107 pools totaling $913 million in October 2017.

November 2018 issuance divided into 31 original pools and 53 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. As we noted last month, tail HMBS issuance can generate profits for years, helping HMBS issuers in challenging periods.

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

September 2018 HMBS Part II: Market Volume Numbers Fall in Autumn

Monday, October 15th, 2018

HMBS float shrank again despite a significant decline in payoffs. Just under $1 billion in payoffs reduced HMBS float to $55.3 billion, down from about $55.5 billion at the end of August. As we noted last week, HMBS issuance rose slightly in September 2018 to just over $587 million, a small increase over August, but much less than payoffs. HMBS float has been range-bound between $55 billion and $57 billion, but could slip below that soon as payoffs continue to outweigh new issuance.

We predicted earlier the industry “may be at Peak Buyout and see a relative decline in Mandatory Buyouts in the near future.”  Last month’s overall payoffs and Mandatory Purchases were at seven month lows. Peak Buyout is 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. Payoffs nonetheless have exceeded $1 billion per month for 11 of the last 14 months, as many loans reached their assignment threshold, equal to 98% of their Maximum Claim Amount (“MCA”).

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $653 million, or about 69%, of the payoffs in September. This is down sharply from last month’s record of $869 million.

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