Archive for the ‘HMBS’ Category

April 2018 HMBS: Perennials Bloom; New Growth Sparse

Tuesday, May 1st, 2018

HMBS issuers welcomed the sunshine of their perennial favorites: tail issuance and highly seasoned collateral, which made for a bountiful spring bloom in April. Last month’s tail pool issuance topped $260 million. With the help of over $542 million in highly seasoned pools, HMBS issuance rose to $1.2 billion, the 7th highest monthly level ever. The supply of highly seasoned, unsecuritized HECM loans is a rapidly melting iceberg, but it’s a big iceberg. Fannie Mae still has about $25 billion in HECMs on its books, years after ceasing its HECM loan purchases.

Despite this, reverse mortgage lenders face a prolonged period of reduced volume, primarily due to the new lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Mortgages (“HECMs”) effective this fiscal year. The supply of recently originated unsecuritized HECMs originated at the old PLFs is essentially exhausted, allowing the full effect of the new PLFs to hit hard. Higher interest rates will not help either, as they generally require lower PLFs.

Production of original new loan pools was $401 million, down even from March’s anemic $419 million, and down sharply from $604 million in February, $657 million in January, and $747 in December 2017. For the foreseeable future, this low level of new production may be the new normal.

April issuance divided into 63 original pools and 57 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 like the long winter of discontent ahead.

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

Game of Loans II: HMBS Winter Wind Blows Away Supply

Friday, April 13th, 2018

HMBS supply shrank significantly in March, falling over $200 million from $56.4 to $56.2 billion. High prepayments and low issuance combined to drive down the total float. The sixth time HMBS supply has declined month to month, this is by far the largest such shrinkage.

Noted in our previous blog on March issuance, reverse mortgage lenders face a long winter of reduced volume, primarily due to the new lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Loans (“HECMs”) effective this fiscal year. HMBS issuance fell to $626 million, the lowest monthly level since September 2014.

We estimate that negative amortization of outstanding pools totaled $210 million, a record. However, the meager issuance and nearly $1.036 billion in payoffs (5th highest ever) resulted in the $200 million reduction in total outstanding HMBS float.

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

Game of Loans: Long HMBS Winter Just Getting Started

Monday, April 2nd, 2018

Winter goes on for years in Westeros, the mythic land featured in Game of Thrones. Even worse, the inhabitants of that land have no idea how long they must endure: past winters lasted for as many as 5 years. Similarly, reverse mortgage lenders face a long winter of reduced volume, primarily due to the new lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Loans (“HECMs”) effective this fiscal year.

HMBS issuance fell to $626 million, the lowest monthly level since September 2014. The supply of unsecuritized HECMs originated at the old PLFs is essentially exhausted, allowing the full effect of the new PLFs to hit hard. No highly seasoned original pools were issued in March.

Production of original new loan pools was $420 million, down sharply from $604 million in February, $657 million in January and $747 in December 2017. For the foreseeable future, this low level of new production may be the new normal.

March issuance divided into 59 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. Last month’s tail issuance was $206 million, consistent with recent months. Tails are not from new loans, but they do represent new amounts lent. Tail HMBS issuances can generate profits for years, helping HMBS issuers in challenging periods like this long winter of discontent.

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

February 2018: Record HMBS Month — But Trending Down

Friday, March 2nd, 2018

HMBS issuers sold a record 129 pools in February 2018, and posted the second highest dollar issuance, $1.47 billion. The dollar total is topped only by December 2009, at the peak of the old HECM regime’s fixed rate issuance boom. Two large highly seasoned original pools totaling $657 million were issued. February issuance divided into 73 original pools (also a record) and 56 tail pools. Without the two seasoned pools, total issuance would have been roughly in line with the average issuance over the last year.

However, the new Principal Limit Factors (“PLFs”) are reducing origination volume. Production of original new loan pools was down at $604 million, down from $657 million in January and $747 in December 2017. New production pools will probably continue to decrease as issuers run out their remaining supply of unsecuritized loans with the old, higher Principal Limit Factors.

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. In other words, tail pools are created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance. Last month’s tail issuance was strong: about $209 million. Tails are not from new loans, but they do represent new amounts lent. HECM loans can generate profits through their monthly tails for years, helping HMBS issuers in challenging periods like this year.

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

New Year’s Resolution: Use HMBS Data Properly

Sunday, February 11th, 2018

The HMBS market began 2018 much like it began 2017, with a month of just under $870 million in total new issuance and range bound in total outstanding float. This may change in 2018 as the new Principal Limit Factors (“PLFs”) start to reduce origination volume. In January, HMBS float rose by over $112 million dollars, helped by a dip in payoffs, which in turn was caused by a sharp decline in HECM refinancings. HMBS prepayments fell to $943 million, the lowest amount in 6 months. Issuers kept HMBS supply up with 111 new pools totaling $869 million.

January issuance divided into 60 original pools and 51 tail pools. No highly seasoned original new loan pools were issued. Production of original new loan pools was decent at $657 million, but is down from December’s big $747 million total. New production pools will probably continue to decrease as issuers run out of their remaining supply of unsecuritized loans with the old, higher PLFs.

However, new HMBS pools secured by new loans do not tell the whole story. Original pools are those HMBS pools backed by first participations in previously uncertificated HECM loans. Tail issuances are HMBS pools consisting of subsequent participations. In other words, tail pools are created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance. Last month’s tail issuance was $212 million, consistent with the record pace of tail issuance in 2017. Tails are not from new loans, but they do represent new amounts lent. An active HECM loan can generate profits through its monthly tails for years, helping HMBS issuers in challenging periods like this year. Analysis that relies on unit-count endorsements or focuses only on original pools production does not give a complete picture of the industry’s health.

Last month, total outstanding HMBS rose by about $112 million from December. We estimate that last month’s change in HMBS balance was composed of over $187 million in negative amortization, plus the $869 million in new issuance, minus $944 million in payoffs. Payoffs have exceeded new issuance in 16 of the last 17 months.

Payoff figures were sharply lower in January, at an approximate 19% annual rate, driven more and more by seasoned HECM participations being liquidated from HMBS pools as they reach 98% of their Maximum Claim Amount (“MCA”). Our friends at RecursionCo crunched the numbers: the payoffs from 98% MCA assignments totaled approximately $619 million last month, the second highest total however. Mandatory 98% MCA purchases are approaching 70% of all HMBS payoffs. Recursion’s data also shows January HMBS payoffs due to refinancing falling below $43 million, the lowest amount since March 2016. This is a sharp decline from the $74 million average in 2017, but not surprising given rising rates and lower PLFs.

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

HMBS December 2017: It Is Better to Give New Issuance than to Receive Payoffs

Sunday, January 14th, 2018

The HMBS market closed out 2017 with a strong month of new issuance but remains range bound in total size. Total HMBS float has been stuck between $54 billion and $56 billion for nearly two years, though this may change in 2018 as the new Principal Limit Factors (“PLFs”) start to reduce origination volume. In December HMBS float rose by over half a billion dollars, helped by the largest monthly issuance in nearly 8 years. HMBS Prepayments topped $1 billion, the 6th highest monthly payoff ever. Issuers kept HMBS supply levitating with 106 new pools totaling $1.35 billion.

December issuance divided into 53 original pools and 53 tail pools. Two highly seasoned original new loan pools were issued. Production of original new loan pools was a strong $748 million, reflecting the mad rush of origination at the end of FY 2017.

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. In other words, tail pools are created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance. December’s tail issuance was strong: about $241 million.

Total outstanding HMBS rose by about $511 million from November. We estimate the change in HMBS balance was composed of over $186 million in negative amortization, plus the $1.35 billion in new issuance, minus $1.02 billion in payoffs. December broke a fifteen month streak in which payoffs exceeded new issuance.

Payoffs remained high in December, still above a 20% annual rate, as more seasoned HECM loans continue to liquidate as they reach 98% of their Maximum Claim Amount (“MCA”). Our friends at RecursionCo crunched the numbers: the payoffs from 98% MCA puts totaled approximately $590 million last month, down 25% from last month’s record.  Nonetheless, according to Recursion the 98% MCA puts were only $92 million, or 29.8% of payoffs in September 2013.

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

2017 HMBS Issuer Rankings – A Busy Fourth Quarter

Wednesday, January 3rd, 2018

AAG keeps the crown as the leading HMBS Issuer for 2017, issuing $2.3 billion of securities for a 21.9% market share, $211 million over #2 Reverse Mortgage Funding’s $2.1 billion and 19.9% market share. RMF issued a whopping $918 million in the fourth quarter, which included the issuance of highly seasoned pools, leapfrogging over Finance of America Reverse for the year. FAR wound up in third with $1.8 billion issued and 17.4% market share. Ocwen Loan Servicing and Live Well Financial once again round out the top five issuers. Ocwen issued $1.3 billion for a 12.2% market share, and Live Well was fifth with $945 million issued for a 9% market share. Longbridge Financial jumped two spots to #6 with $606 million issued.

The fourth quarter counted nearly $3.3 billion of HMBS, almost one third of calendar 2017’s entire issuance. December alone saw $1.35 billion of securities issued. The top five issuers accounted for 80.4% of all issuance, about the same as last quarter. Just 8.5% of 2017 HMBS issuance was fixed rate. There remain 16 active HMBS issuers in the industry.

Despite the month-to-month fluctuations in HECM endorsements, HMBS issuance remains robust, aided by growth in tail issuance and, in the fourth quarter, some issuance of highly seasoned pools. While endorsement count is an ok proxy for new origination volume, it does not provide a comprehensive picture of overall industry growth or health. HMBS issuance volume totaled $10.5 billion for 2017, just $160 million shy of 2010’s record year of $10.7 billion.

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

 

HMBS November 2017: Don’t Look Down

Monday, December 11th, 2017

Last month the HMBS market impersonated the Coyote, holding an anvil of loan payoffs in mid-air but not falling. That will change soon when the full effect of new PLFs inevitably shrinks the outstanding HMBS float, which fell slightly in November despite the largest issuance in 15 months. HMBS prepayments topped $1.2 billion, the highest monthly payoff ever. 14 issuers kept HMBS supply levitating with 114 new pools totaling $989 million. Like the Acme Company, some of these issuers are introducing new products to address the shortcomings of the old.

November issuance divided into 53 original pools and 61 tail pools. No highly seasoned original new loan pools were issued. Production of original new loan pools was a whopping $755 million, reflecting the rush to close loans under the old PLFs.

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. In other words, tail pools are created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance. Last month’s tail issuance was strong: about $233 million.

Last month, total outstanding HMBS fell by almost $94 million from October. We estimate the change in HMBS balance was composed of $184.6 million in negative amortization, plus the $989 million in new issuance, minus $1.267 billion in payoffs. Payoffs have exceeded new issuance for fifteen months in a row.

Payoff figures were very high in November, smashing records with a 24% annual rate as more seasoned HECM loans liquidated or reached 98% of their Maximum Claim Amount (“MCA”). Our friends at RecursionCo crunched the numbers: the payoffs from 98% MCA puts totaled approximately $791 million last month, by far the highest total ever. According to Recursion, the 98% MCA puts were only $92 million, or 29.8% of payoffs in September 2013.

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

October 2017: HMBS Market Sees a Ghost

Sunday, November 12th, 2017

In a month where HECM lenders were haunted by the specter of lower Principal Limit Factors, the HMBS market froze with fright – again – at $55 billion in September. HMBS Prepayments topped $1 billion, the third highest monthly payoff ever. However, a record 15 issuers whistled past the graveyard with 107 new pools totaling over $913 million.

October issuance divided into 48 original pools and 59 tail pools. Two highly seasoned original new loan pools were issued. Production of original new loan pools was a healthy $615 million, a typical total for this year.

November issuance promises to be very interesting indeed, as pools are already being issued backed by some of the new lower PLF/lower interest rate loans.

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. In other words, tail pools are created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance. October’s tail issuance was very strong: about $264 million, the third highest ever.

Last month, total outstanding HMBS grew by almost $40 million from September. We estimate that last month’s change in HMBS balance was composed of over $184.2 million in negative amortization, plus the $913 million in new issuance, minus $1.06 billion in payoffs. Last month’s payoffs were the third highest ever; payoffs have exceeded new issuance for fourteen months in a row.

Payoffs figure are still high, running above a 20% annual rate as more seasoned HECM loans liquidate or reach 98% of their Maximum Claim Amount (“MCA”). Our friends at RecursionCo crunched the numbers: the payoffs from 98% MCA puts again totaled approximately $614 million last month, the third highest total ever. According to Recursion, the 98% MCA puts were only $92 million, or 29.8% of payoffs in September 2013.

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

HMBS September 2017: Slow Climb Up the Down Escalator

Sunday, October 15th, 2017

The HMBS market remained stuck – again – at $55 billion in September. HMBS Prepayments topped $1 billion, but was balanced by 114 new pools from 14 different issuers totaling over $879 million.

September issuance divided into 49 original pools and 65 tail pools. No seasoned original new loan pools were issued. Production of original new loan pools was a healthy $627 million, a typical total for this year.

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. In other words, tail pools are created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance. September’s tail issuance was strong: about $252 million.

Last month, total outstanding HMBS grew by only $12 million from August. We estimate that last month’s change in HMBS balance was composed of over $184 million in negative amortization, plus the $879 million in new issuance, minus $1.05 billion in payoffs. Last month’s payoffs were the third highest ever; payoffs have exceeded new issuance for thirteen months in a row.

Payoff figures are still high as more seasoned HECM loans liquidate or reach 98% of their Maximum Claim Amount (“MCA”). Our friends at RecursionCo show that payoffs from 98% MCA assignments totaled approximately $614 million last month, the second highest total ever. According to Recursion, the 98% MCA puts were only $92 million, or 29.8% of payoffs in September 2013.

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