Archive for the ‘HMBS’ Category

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.

2018 First Nine Months HMBS Issuer Rankings –Volume Slows

Thursday, October 4th, 2018

RMF keeps its pole position after the first nine months of 2018, issuing $2.52 billion of HMBS securities for a 33.9% market share, a drop from its commanding 40% Q2 market share, but still well ahead of second place AAG. AAG issued $437 million of HMBS in Q3, 73% more than RMF’s $253 million, for an overall 20% market share. RMF issued no seasoned pools in the quarter. FAR stays in third with $1.06 billion issued and 14.3% market share. Ocwen Loan Servicing and Live Well Financial again round out the top five issuers. Ocwen issued $728.7 million for a 9.8% market share, and Live Well was fifth with $522.1 million issued for a 7% market share. The top five issuers accounted for 85% of all issuance, down 1% from last quarter. There were 14 active HMBS issuers last quarter – only Bank of America did not issue HMBS in Q3.

The first nine months of 2018 saw $7.43 billion of HMBS issued, with Q3 issuance at $1.71 billion, off by more than $1 billion from either the first or second quarters. Unless highly seasoned pool issuance returns, expect lower volume for the foreseeable future. As we have noted previously, tail issuance will provide some volume (and profit) stability to HMBS issuers to offset this slowdown. HMBS issuance volume for the first nine months of 2017 totaled $7.29 billion.

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

September 2018 HMBS: Try to Remember That Time in September (of Last Year)

Wednesday, October 3rd, 2018

HMBS issuance rose in September 2018 to just over $587 million, a small increase over August, but still one of the lowest issuance months in recent years. No highly seasoned pools were issued. In all, 104 pools were issued in September. When all the data are in, we expect another $1 billion plus in payoffs to shrink HMBS float again.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the 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 about $360 million, up from August’s $344 million, but these small, short-term upticks in HMBS production are hardly proof of a recovery. Last month’s tail pool issuances totaled $213 million, within the range of recent tail issuance. By comparison, HMBS issuers sold 114 pools totaling $879 million in September 2017.

September 2018 issuance divided into 45 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. 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.

August 2018 HMBS: Cat Has Eight Lives Left

Thursday, September 13th, 2018

HMBS issuance rose slightly in August 2018 to just over $579 million, a small increase over July, which was the lowest issuance month in nearly four years. No highly seasoned pools were issued. In all, 110 pools were issued in August. Over $1.2 billion in payoffs shrank HMBS float by a record $500 million. Last month we noted that since February 2017 HMBS float has been range-bound between $55 billion and $57 billion but could fall below that range with the continued payoff deluge and issuance drought. That could happen as early as next month, with outstanding HMBS now below $55.5 billion.

Payoffs have exceed $1 billion per month for 11 of the last 13 months, a trend likely to continue as many loans reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”). Meanwhile, reverse mortgage lenders face a long winter of reduced volume, primarily due to the new lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Mortgages (“HECMs”) effective this fiscal year. Rising interest rates will not help either, as they generally require lower PLFs.

Production of original new loan pools was about $344 million, up from July’s $318 million, but these small, short-term upticks in HMBS production or HECM endorsements are hardly proof of a recovery or even a dead cat bounce. They are more like the window awnings that break the fall of a cat from a high roof. August production was also down from June’s $353 million, May’s $367 million, April’s $401 million, and down sharply from $604 million in February, $657 million in January and $747 million in December 2017. HMBS issuance topped $916 million in August 2017. Last month’s tail pool issuances totaled $235 million, within the range of recent tail issuance. We shall see if the cat still has eight lives left or merely bounces eight times when it hits the ground.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $869 million, or about 70%, of the payoffs in August. This shatters the record $791 million set last November.

August issuance divided into 51 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. 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.

July 2018: HMBS Supply Fades Away With Summer

Saturday, August 11th, 2018

HMBS issuance fell sharply in July 2018 to just over $542 million, the lowest issuance month in nearly four years. No highly seasoned pools were issued. In all, 98 pools were issued in July. Over $1 billion in payoffs shrank HMBS float by a record $355 million. Since February 2017, HMBS float has been range-bound between $55 billion and $57 billion, but could fall below that with the continued payoff deluge and issuance drought.

Payoffs have exceeded $1 billion per month for 10 of the last 12 months, a trend likely to continue as many loans reach their buyout threshold, equal to 98% of their Maximum Claim Amount. Meanwhile, reverse mortgage lenders face a long winter of reduced volume, primarily due to the new lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Mortgages (“HECMs”) effective this fiscal year. Rising interest rates will not help either, as they generally require lower PLFs, although many HECM lenders have reduced interest rates and margins to maintain PLFs.

Production of original new loan pools was just under $318 million, down from June’s $353 million, May’s $367 million, April’s $401 million, and down sharply from $604 million in February, $657 million in January, and $747 million in December 2017. HMBS issuance topped $847 million in July 2017. Last month’s tail pool issuances totaled $225 million, within the range of recent tail issuance.

July issuance saw 44 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. 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.

HMBS June 2018 Part II: Supply Grows Slowly, Despite Large Seasoned Issuance

Wednesday, July 11th, 2018

HMBS supply rose in June by a scant $128 million, despite a large issuance of highly seasoned new pools.

We noted in previous blogs that reverse mortgage lenders face a long winter of reduced volume, primarily due to the new lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Mortgages (“HECMs”) effective this fiscal year. The total for new pools backed by new loans in June was a measly $353 million; overall new supply was $964 million, and tail issuance remained strong. Without the additional $356 million in highly seasoned new pools, supply would have shrunk sharply, as was the case in May.

We estimate that negative amortization of outstanding pools totaled $204 million. Total estimated payoffs topped $1 billion for the fourth month in a row. Most of the payoffs were once again due to mandatory buyouts, in which the issuer buys out HMBS participations backed by HECM loans whose balances have reached 98% of their Maximum Claim Amount. Our friends at Recursion show about $672 million of the payoffs resulting from Mandatory Buyouts, the fourth highest total ever. This wave of buyouts is an echo of the very large issuance from 2009 through the first half of 2013, especially pools backed by fixed rate HECMs with higher interest rates and higher initial PLFs. The second and third quarter of 2018 may prove to be “Peak Buyout,” followed by a decline in Mandatory Buyouts in the fourth quarter and beyond.

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

Seasoned HMBS Boon in June: Issuers Croon Old Tune to Avoid Issuance Swoon

Tuesday, July 3rd, 2018

After a tepid May, HMBS issuance rose sharply in June 2018 to over $964 million with the help of more than $356 million in highly seasoned new issuance, exceeding that of new production. In all, 116 pools were issued in June.

As we noted in previous blogs, reverse mortgage lenders face a long winter of reduced volume, primarily due to the new lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Mortgages (“HECMs”) effective this fiscal year. Rising interest rates will not help either as they generally require lower PLFs, although many HECM lenders have reduced interest rates and margins to maintain PLFs.

Production of original new loan pools was just under $353 million, down from May’s $367 million, April’s $401 million, and down sharply from $604 million in February, $657 million in January and $747 million in December 2017. HMBS issuance topped $779 million in June 2017. For the foreseeable future, this low level of production looks like the new normal. Last month’s tail pool issuance was a healthy $255 million, on the high end of recent tail issuance.

June issuance saw 54 original pools and 62 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 such as now.

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

2018 First Half HMBS Issuer Rankings – Seasoned Collateral Rules

Monday, July 2nd, 2018

RMF remains atop the leaderboard after the first six months of 2018, issuing $2.26 billion of HMBS securities for a 39.6% market share, more than double #2 AAG’s $1.05 billion and 18.5% market share. RMF’s totals include highly seasoned pools, issued throughout the half. FAR stays in third with $767 million issued and 13.4% market share. Ocwen Loan Servicing and Live Well Financial again round out the top five issuers. Ocwen issued $500 million for an 8.7% market share, and Live Well was fifth with $357 million issued for a 6.3% market share. The top five issuers accounted for 86% of all issuance, the same as last quarter. There were 15 active HMBS issuers in the half.

The first half of 2018 saw $5.71 billion of HMBS issued, on track to beat 2010’s record year of $10.7 billion, thanks to the previously mentioned highly seasoned HMBS issuance. But, unless that becomes the norm, expect lower volume for the second half of 2018 due to the new PLF curves in effect since October. As we have noted previously, tail issuance will provide some profit stability to HMBS issuers to offset this slowdown. HMBS issuance volume for the first half of 2017 totaled $4.65 billion.

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

HMBS May 2018 Part II: Reprieve Over, Supply Shrinking at Record Rate

Sunday, June 10th, 2018

HMBS supply fell in May by a record $317 million, due to a combination of high prepayments and low issuance.

We noted in previous blogs that reverse mortgage lenders face a long winter of reduced volume, primarily due to the new lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Mortgages (“HECMs”) effective this fiscal year. The total for new pools backed by new loans in May was a measly $367 million; overall new supply was $579 million, as tail issuance remained strong.

We estimate that negative amortization of outstanding pools totaled $203 million. Most of the payoffs were once again due to mandatory buyouts in which the issuer buys out HMBS participations backed by HECM loans whose balances have reached 98% of their Maximum Claim Amount. Our friends at RecursionCo show about $693 million of the payoffs resulting from Mandatory Buyouts, the second highest total ever. However, for the third month in a row, this was a lower percentage of overall buyouts. This wave of buyouts is an echo of the very large issuance from 2009 through the first half of 2013, especially those backed by fixed rate HECMs with higher interest rates and higher initial PLFs. The second and third quarters of 2018 may prove to be “Peak Buyout,” followed by a decline in Mandatory Buyouts in the fourth quarter and beyond.

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

May 2018 HMBS: April Showers Bring … Not Many May Flowers

Friday, June 1st, 2018

After a robust month in April, HMBS issuance retreated to its new normal in May. Without the help of any highly seasoned pools, HMBS fell to $579 million, the lowest monthly level since September 2014.

As we noted in previous blogs, reverse mortgage lenders face a long winter of reduced volume, primarily due to the new lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Mortgages (“HECMs”) effective this fiscal year. Rising interest rates will not help either, as they generally require lower PLFs, although so far many HECM lenders have reduced interest rates and margins to maintain PLFs.

Production of original new loan pools was just under $367 million, down even from April and March’s $401 and $419 million, and down sharply from $604 million in February, $657 million in January, and $747 in December 2017. By comparison, HMBS issuance topped $768 million in May 2017. For the foreseeable future, this low level of production looks like the new normal. Last month’s tail pool issuance also retreated to just under $213 million, though this is well within the range of recent tail issuance.

May issuance divided evenly into 57 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 offset challenging periods such as this.

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