Archive for the ‘HMBS’ Category

HMBS December 2022 Part II: Issuer 42 to the Rescue

Wednesday, January 11th, 2023

HMBS payoffs fell again in December, as the refinancing retreat continued. December payoffs totaled about $815 million, the lowest payoff amount in 23 months and the lowest payoff rate in nearly 7 years. Outstanding HMBS rose to a record $59.8 billion due to faster roll-up from rising interest rates and the drop in payoffs.

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, but 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, 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 the 4,053 former RMF pools. This new “Issuer 42” accounts for over $21 billion, about 35% of all outstanding HMBS.

The 10-year treasury fell sharply in recent weeks and the lending limit/MCA was raised to $1,089,300 in 2023; it remains to be seen if this will slow the steady decline in industry volume.

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, over 53% of HMBS payoffs last month were due to Mandatory Purchase. Last month’s 98% MCA Mandatory Purchases totaled nearly $414 million, the highest total in 3 years.

Including the Mandatory Purchases, HMBS paid off at a 15.2% annual rate in December, the slowest one-month rate since February 2016. Exclusive of Mandatory Purchases, the rate of HMBS payoffs is falling rapidly. HMBS payoffs resulting from underlying HECM loan payoffs, including payoffs due to mortality and refinancing, fell to about 7% for the first time in 3 years, barely one-third the rate of a year ago.

Despite the recent industry volume slowdown, 2022 set a new record: just under $14 billion in HMBS issued, topping last year’s record of $13.2 billion. With the strong headwinds faced by the reverse mortgage industry, the remaining HMBS issuers will struggle to reach half that total in 2023.

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

2022 Full Year HMBS Issuer League Tables – Quarterly Volume Off Another 26%

Tuesday, January 3rd, 2023

AAG captured the crown in 2022, with $3.08 billion HMBS and 22% market share. FAR settled for second, issuing $2.73 billion for a 19.5% market share. Longbridge tied down third with $2.54 billion issued and 18.2% market share, RMF finished in fourth with $2.38 billion issued and 17% market share, and PHH topped off the Top Five with $1.78 billion issued for a 12.7% market share. Expect the 2023 rankings to be almost unrecognizable over time as the industry consolidates and confronts the realities of the RMF bankruptcy, higher interest rates, and lower home values.

The Top Five issuers accounted for 90% of all HMBS issuance, down another percent from last quarter. Mutual of Omaha Mortgage is now firmly entrenched at #6, continuing its issuance trend and helping to explain the continued drop in aggregate volume for the Top Five issuers. This metric will undergo radical change in the coming months.

2022Q4 saw $2.34 billion of HMBS issued, down 26% from last quarter’s $3.15 billion, which was down 29% from Q2. However, even with the issuance slowdown, total 2022 volume totaled $13.98 billion, a new annual issuance record. It may stand awhile.

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

HMBS December 2022: Christmas Ghosts Change Places

Tuesday, January 3rd, 2023

HECM Mortgage-Backed Securities (“HMBS”) issuance fell in December to $742 million, falling for the eighth straight month. For the reverse mortgage industry, Dickens’ Christmas ghosts seem to have changed places: the good times represented by the jolly Ghost of Christmas Present are gone, the future looks like the HECM market of decades past, with higher interest rates and lower volumes, and the present is best represented by the scary Ghost of Christmas Future. However, in its recent annual report, FHA provided some good news: the HECM program is fiscally sound. Surely Tiny HECM will live?

On November 30, 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 issued 16 pools in December totaling $117 million. The fate of this large HMBS portfolio is still unclear at this time.

HMBS issuance set a new record in 2022, with nearly $14 billion issued. HMBS issuance totaled just under $13.2 billion for 2021. However, in the current market environment, HMBS issuers will be hard pressed to come near those numbers in 2023.

December’s original (first participation) production fell to $448 million, down from $516 million in November and less than one-third of April’s record $1.4 billion in new issuance. December’s original new loan pool production was also much less than that of December 2021, when approximately $1.14 billion in original new HMBS pools were issued.

80 pools were issued in December, one of the lowest new pool counts in years. These 80 pools consisted of 29 first-participation or original pools and 51 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 $294 million, above the typical range.

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

HMBS November 2022 Part II: Winter Headwinds Blowing

Friday, December 9th, 2022

HMBS payoffs fell again in November, as the refinancing retreat turned into a rout. November payoffs totaled about $830 million, the lowest dollar amount in 22 months and the lowest payoff rate in over 6 years. Outstanding HMBS rose to a record $59.7 billion due to faster roll-up from rising interest rates and the drop in payoffs.

The HECM refi wave was assisted by a higher lending limit or Maximum Claim Amount “MCA” (for now $970,800) and surging home prices. 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. Additional woes came in the fourth quarter. In October, the trend of declining home prices became more clear and widespread. In November, Reverse Mortgage Funding, 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.

However, the 10-year treasury fell sharply in recent weeks and the lending limit/MCA will be raised to $1,089,300 in 2023; it remains to be seen if this will slow the steady decline in industry volume.

As interest rates rise, HECM loans hit their 98% MCA threshold faster. When a HECM loan balance reaches 98% of its MCA, the HMBS issuer is required to buy the loan 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 HECM loan remains outstanding. According to our friends at Recursion, over 50% of HMBS payoffs last month were due to Mandatory Purchase. Last month’s 98% MCA Mandatory Purchases totaled nearly $400 million, the highest total in 2 1/2 years.

Including the Mandatory Purchases, HMBS paid off at a 15.6% annual rate in November, the slowest one-month rate since June 2016. Exclusive of Mandatory Purchases, the rate of HMBS payoffs is falling rapidly. HMBS payoffs resulting from underlying HECM loan payoffs, including payoffs due to mortality and refinancing, fell to about 7.5% for the first time in over 3 years, barely one-third the rate of a year ago.

Despite the recent industry volume slowdown, 2022 has already set a new volume record: over $13.2 billion in HMBS issued, topping last year’s record. With the strong headwinds faced by the reverse mortgage industry, it seems unlikely that record will be surpassed in 2023.

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

HMBS November 2022: Instead of Thanksgiving, Another Halloween

Thursday, December 1st, 2022

HECM Mortgage-Backed Securities (“HMBS”) issuance fell sharply in November to $763 million, falling for the seventh straight month.

On November 30, Reverse Mortgage Funding (“RMF”), the largest HMBS issuer of record, filed for bankruptcy. RMF is the issuer of record for approximately $21 billion of the $59 billion of total outstanding HMBS. RMF issued 15 pools in November totaling $118 million, versus $150 million in October. The fate of RMF’s HMBS portfolio is unclear at this time. The obligations for this portfolio, such as borrower advances, pool buyouts, tail issuance, and payment of mortgage insurance premiums, will all have to be worked out, possibly through a transaction in which another issuer takes over.

With a month to spare, HMBS issuance volume set a new record in 2022, with $13.23 billion issued through eleven months. HMBS issuance totaled just under $13.2 billion for 2021. However, in the current market environment, HMBS issuers will be hard pressed to come near those numbers in 2023.

November’s original (first participation) production fell to $516 million, down from $607 million in October, $744 million in September, $749 million in August, and barely one-third of April’s record $1.4 billion in new issuance. November’s original new loan pool production was also much less than that of November 2021, when approximately $1.08 billion in original new HMBS pools were issued.

76 pools were issued in November, the lowest new pool count since April 2014. These 76 pools consisted of 30 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 $246 million, within the typical range.

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

HMBS October 2022 Part II: Refinancings Going, Going … but not Gone

Wednesday, November 9th, 2022

HMBS payoffs fell again in October, as the refinancing wave continued its steady retreat. October payoffs totaled about $900 million, the lowest level in 20 months. Outstanding HMBS rose to a record $59.5 billion due to faster roll-up from rising interest rates and the drop in payoffs.

The HECM refi wave was assisted by a higher lending limit or Maximum Claim Amount “MCA” (now $970,800) and surging home prices. Higher interest rates finally caught up with the HMBS market, driving down Principal Limit Factors (initial loan-to-value ratios or “PLFs”) sharply. With the 10-year treasury above 4% and average loan margins well above 2%, HECM borrowers face higher rates and lower PLFs. This will prevent many potential new HECM borrowers from refinancing.

As interest rates rise, HECM loans hit their 98% MCA threshold faster. 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 HECM loan remains outstanding. According to our friends at Recursion, 43% of HMBS payoffs last month were due to Mandatory Purchase. Last month’s 98% MCA Mandatory Purchases totaled $373 million, the highest total in 2 ½ years.

Including the Mandatory Purchases, HMBS paid off at a 17.1% annual rate in October, only the third one-month payoff rate of less than 18% in the last 20 months. Exclusive of Mandatory Purchases, the rate of HMBS payoffs is falling rapidly. HMBS payoffs resulting from underlying HECM loan payoffs, including payoffs due to mortality and refinancing, fell below 10% for the first time in 2 ½ years, barely half the rate of a year ago.

Despite the industry volume slowdown, 2021’s previous $13.2 billion HMBS issuance record will almost certainly fall: over $12.5 billion was issued in the first ten months of 2022.

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

October 2022: Halloween Scare – HMBS Issuance a Ghost of its Former Self

Tuesday, November 1st, 2022

HECM Mortgage-Backed Securities (“HMBS”) issuance fell in October to $824 million, falling for the sixth straight month as higher interest rates continued to take their toll. HMBS issuance remained below $1 billion for only the third time in 19 months.

With ten months in the books and nearly $12.5 billion issued, HMBS is on pace to set another new volume record in 2022. However, for the foreseeable future higher interest rates will challenge the reverse mortgage market, driving down home values and the Principal Limit Factors (“PLFs”) that determine how much HECM lenders can lend against those home values.

October’s original (first participation) production fell to $607 million, down from $744 million in September, $749 million in August, and significantly below July’s $975 million, June’s $1.1 billion, and May’s $1.2 billion, and less than half April’s record $1.4 billion in new issuance. October’s original new loan pool production was also much less than October 2021, when approximately $1.07 billion in original new HMBS pools were issued.

84 pools were issued in October: 37 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 $216 million, within the typical range.

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

HMBS September 2022 Part II: Refi Retreat Resumes

Wednesday, October 12th, 2022

HMBS payoffs fell again in September, as the refinancing wave resumed its retreat. September payoffs totaled about $948 million, the lowest amount in 19 months. Outstanding HMBS rose to a record $59.3 billion due to a faster roll-up from rising interest rates and the drop in payoffs.

The HECM refinance wave was assisted by a higher HECM lending limit or Maximum Claim Amount (“MCA,” now $970,800) and surging home prices. Higher interest rates have finally caught up with the HMBS market, driving down principal limit factors (initial loan-to-value ratios) sharply.

September HMBS paid off at a 17.6% annual rate, only the second 1-month payoff rate below 20% in over a year. The natural rate of payoffs is falling rapidly. Natural HMBS payoffs result from underlying HECM loan payoffs, including HECM loan payoffs due to mortality and refinancing and excluding Mandatory Purchases (see below). Natural HMBS payoffs are barely half of what they were a year ago and are bound to fall further, perhaps sharply, in the fourth quarter.

As interest rates rise, HECM loans hit their 98% MCA threshold faster. When a HECM loan balance reaches 98% MCA, the HMBS issuer is required to buy these loans out of the HMBS pool. Although this is effectively a prepayment event for the HMBS investor, the HECM loan remains outstanding. Our friends at Recursion broke down the prepayment numbers further: 40% of HMBS payoffs last month were due to Mandatory Purchase. Last month’s 98% MCA mandatory purchases totaled $363 million, the highest total in nearly 2 ½ years.

While 2021 is the current issuance volume recordholder with $13.2 billion of HMBS issued, that record may still fall: over $11.6 billion was issued in the first nine months of 2022.

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

2022 First Nine Months HMBS Issuer League Tables – Quarterly Volume Off 29%

Wednesday, October 5th, 2022

AAG is still the #1 HMBS issuer in Q3, with $2.588 billion HMBS and 22.2% market share. FAR remains close behind in second, issuing $2.361 billion for a 20.3% market share. Longbridge stays in third with $2.128 billion issued and 18.3% market share, RMF is still fourth with $1.995 billion issued and 17.1% market share, and PHH rounds out the Top Five again, with $1.508 billion issued for a 12.9% market share.

The Top Five issuers accounted for 91% of all HMBS issuance, down two percent from last quarter. Cherry Creek returned to the market issuing $80 million during the quarter and increasing the number of issuers back to 13. Mutual of Omaha Mortgage moved up another notch to #6, continuing its issuance trend, also helping to explain the continued drop in aggregate volume for the Top Five issuers.

2022Q3 saw $3.15 billion of HMBS issued, down a significant 29% from last quarter’s record $4.42 billion, breaking the six consecutive quarters record issuance streak. However, as mentioned in recent blogs, even with the anticipated issuance slowdown, total 2022 volume could still surpass 2021’s $13.2 billion issuance record.

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

HMBS September 2022: New School Year May Bring Difficult Lessons

Monday, October 3rd, 2022

HECM Mortgage-Backed Securities (“HMBS”) issuance fell in September to $966 million, falling for the fifth straight month as higher interest rates continued to take their toll. HMBS issuance remained below $1 billion for only the second time in 18 months.

With nine months in the books and over $11.6 billion issued, HMBS is still on pace to eclipse 2022’s record $13.2 billion issuance total. However, for the foreseeable future higher interest rates will challenge the reverse mortgage market, driving down home price appreciation and the Principal Limit Factors that determine how much HECM originators can lend against those likely-falling home values.

September’s original (first participation) production fell to $744 million, slightly below August’s $749 million, but significantly below July’s $975 million, June’s $1.1 billion, May’s $1.2 billion, and barely half April’s record $1.4 billion in new issuance. September’s original new loan pool production was also much less than that of September 2021, when approximately $1.03 billion in original new HMBS pools were issued.

90 pools were issued in September: 42 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 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 $222 million, within the typical range.

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