Archive for the ‘HMBS’ Category

HMBS March 2021 Part II: The Big Payoff

Friday, April 9th, 2021

Outstanding HMBS fell by about $110 million in March 2021, as payoffs spiked and issuance eased somewhat. Payoffs rose to nearly $1.1 billion, the 7th highest monthly total ever. Total outstanding HMBS is now nearly $56.3 billion. The big payoff reflects continued high levels of refinancing.

February was the last month in which GNMA allowed issuance of HMBS pools backed by first participations of LIBOR-indexed loans. For the time being, the Treasury CMT index replaces LIBOR as the base index for newly originated adjustable-rate HECM loans.

In 2019, HMBS posted its lowest annual issuance total in five years. But in 2020 low interest rates and a higher lending limit boosted production significantly to a near-record $10.6 billion. In 2021, the industry may struggle to reach the same levels of production, challenged by higher interest rates. However, new issuance in the first quarter was fairly strong at nearly $2.7 billion.

“Peak Buyout” was an echo of the peak issuance from 2009 through the first half of 2013. Most of this production has already been repurchased by the issuers or repaid by borrowers. Each month fewer and fewer of these peak issuance loans remain, and with lower interest rates loans take longer to roll up to their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”). Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $207 million, the lowest total in nearly seven 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.

2021Q1 HMBS Issuer League Tables – “Top Five” Account for 94% of all Issuance

Monday, April 5th, 2021

AAG maintained its #1 HMBS issuer ranking for the first quarter of 2021 with $704.6 million of issuance and 26.3% market share. FAR held on to second with $544.2 million issued and 20.3% market share. Longbridge was third, again just behind FAR, with $541.2 million issued and 20.2% market share, and RMF was fourth with $442.7 million issued and 16.5% market share. PHH Mortgage rounded out the Top Five again, with $287.8 million and a 10.7% market share. These five issuers accounted for more than 94% of all HMBS issuance in the quarter, consistent with past performance. There were 14 active HMBS issuers in 2021Q1, one more than last year, with Mutual of Omaha returning to market and issuing two pools.

2021Q1 saw $2.68 billion of HMBS issued, slightly off last quarter’s $3.04 billion but up 28% from 2020’s first quarter $2.09 billion tally. While the quarter’s run rate would put the industry annual total over $10 billion, higher interest rates may challenge volume in the later months of 2021.

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

HMBS March 2021; HECM MMI Fund: As Predicted

Thursday, April 1st, 2021

HMBS issuance remained fairly strong at $858 million in March 2021, the first month of the post-LIBOR era. February 2021 was the last month in which Ginnie Mae allowed pooling of new HMBS pools backed by first participations of LIBOR-based HECMs. The Constant Maturity Treasury “CMT” index is now the only index for new adjustable rate HECM loans and will remain so until a transition to another index, likely the Secured Overnight Financing Rate, or “SOFR.” 91 pools were issued in March, including 35 first-participation CMT pools. Before January 2021 no new first-participation CMT pools had been issued in many years.

Earlier this week, the HECM industry received good news that FHA’s MMI Fund now shows a surplus of 2.39% for the HECM portion of the Fund. This report comes only four months after FHA claimed the HECM program was a drag on its mortgage insurance program and was being “subsidized” by their forward mortgage program. New View Advisors was skeptical of this pessimistic view and made our case December 7, 2020: https://www.newviewadvisors.com/commentary/forward-mortgage-does-not-subsidize-reverse-mortgage/. We predicted FHA would soon show a significant HECM surplus, and that has already come to pass. FHA should now be under less pressure to take measures to reduce HECM risk, program changes that could have taken the form of higher Mortgage Insurance Premiums (MIP) or lower lending limits.

A record $10.6 billion in HMBS was issued in 2020, easily beating 2019’s total of $8.3 billion and 2018’s $9.6 billion. HMBS issuance in the first quarter of 2021 totaled about $2.7 billion, but issuers may find it difficult to maintain this pace in the face of rising interest rates.

March production of original new loan pools was $671 million, compared to February’s $693 million, January’s $552 million, December’s record $878 million, and November’s $765 million. Approximately $455 million in original new loan pools were issued in March 2020.

March issuance divided into 43 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, FHA mortgage insurance premiums, etc. Last month’s tail pool issuances totaled $187 million, below the typical $200-$250 million range.

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

HMBS February 2021 Part II: Farewell to LIBOR ARMs

Tuesday, March 9th, 2021

Outstanding HMBS rose by $159 million in February 2021, as issuers rushed to issue new LIBOR pools. February was the last month in which GNMA allowed issuance of HMBS pools backed by first participations of LIBOR-indexed loans. For the time being, the Treasury CMT index replaces LIBOR as the base index for newly originated adjustable-rate HECM loans. Payoffs rose to about $825 million. Total outstanding HMBS is now $56.4 billion, nearly an all-time high and the highest total in two and a half years.

In 2019, HMBS posted its lowest annual issuance total in five years. But in 2020 low interest rates and a higher lending limit boosted production significantly to a near-record $10.6 billion. The industry may struggle to reach the same levels of production in 2021, challenged by higher interest rates.

“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. Each month fewer and fewer of these peak issuance loans remain, and so fewer HECM loans reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”). Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $225 million, the lowest total in nearly 7 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. With buyouts at less than one-third their peak level, Peak Buyout is long gone.

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

HMBS February 2021: Issuance Blizzard Ends LIBOR Era

Monday, March 1st, 2021

HMBS issuance totaled $872 million in February 2021, as the LIBOR deadline finally arrived. February 2021 was the last month in which Ginnie Mae allowed pooling of new HMBS pools backed by first participations of LIBOR-based HECMs. 92 pools were issued in February; of these, 17 pools totaling $224 million were pools backed by new LIBOR loans.

February also saw strong issuance of HMBS backed by new CMT-indexed loans; 27 pools totaling just under $418 million were issued in this category. Before January 2021 no new first-participation CMT pools had been issued in many years.

A record $10.6 billion in HMBS was issued in 2020, easily beating 2019’s total of $8.3 billion, 2018’s $9.6 billion, and even eclipsing the $10.5 billion set in 2017. 2010 remains the all-time HMBS volume year with $10.8 billion issued, when Principal Limits were high and no borrower financial assessment safeguards had been established. HMBS issuers will be hard pressed to equal last year’s total, but now that the LIBOR deadline has passed, the reverse mortgage picture should soon become clear.

February production of original new loan pools was $693 million, up from January’s $552 million, but significantly down from December’s record $878 million and November’s $765 million. Approximately $501 million in original new loan pools were issued in February 2020.

February issuance divided into 50 first-participation or original pools, and 42 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, FHA mortgage insurance premiums, etc. Last month’s tail pool issuances totaled $180 million, below the typical $200-$250 million range.

Helped by low interest rates, low default rates, and the reemergence of private loans, the reverse mortgage market appears strong. However, this strength could be challenged by economic conditions, rising interest rates and the transition out of LIBOR. The Constant Maturity Treasury “CMT” index is now the only index for new adjustable rate HECM loans and will remain so until transition to another index, likely the Secured Overnight Financing Rate “SOFR,” occurs.

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

HMBS January 2021 Part II: Mad Dash to the LIBOR Exit

Tuesday, February 9th, 2021

Outstanding HMBS rose by about $285 million in January 2021, as issuers rushed to issue new LIBOR pools. After February 2021, GNMA will no longer allow issuance of HMBS pools backed by first participations of LIBOR-indexed HECMs. Payoffs fell significantly to about $790 million. Total outstanding HMBS is now over $56 billion, the highest total in two and a half years.

In 2019, HMBS posted its lowest annual issuance total in five years. But in 2020 low interest rates and a higher lending limit boosted production significantly to a near-record $10.6 billion. The industry may struggle to reach the same levels of production in 2021.

“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. Each month fewer and fewer of these peak issuance loans remain, and so fewer HECM loans reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”). Our friends at Recursion broke down the prepayment numbers further: las month’s 98% MCA mandatory purchases totaled $252 million, near December 2020’s 6-year low. 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. With buyouts at less than one-third their peak level, Peak Buyout is long gone.

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

HMBS January 2021: LIBOR Hangover After Wild New Year’s Eve Party

Monday, February 1st, 2021

HMBS issuance totaled $949 million in January 2021, as issuers began to wrap up securitization of new LIBOR-indexed HECM loans. January 2021 is the next-to-last month in which Ginnie Mae will allow pooling of new HMBS pools backed by first participations of LIBOR-based HECMs. 81 pools were issued in January; 12 pools totaling about $191 million were pools backed by new LIBOR loans.

January also saw the appearance of HMBS backed by new CMT-indexed loans; 19 pools totaling just under $300 million were issued in this category. No new first-participation CMT pools had been issued for many years. January’s total was also helped by a large ($208 million) highly seasoned CMT pool.

A record $10.6 billion in HMBS was issued in 2020, easily beating 2019’s total of $8.3 billion, 2018’s $9.6 billion, even eclipsing the $10.5 billion set in 2017. 2010 remains the all time HMBS volume year with $10.8 billion issued, when Principal Limits were high and no borrower financial assessment safeguards had been established. HMBS issuers will be hard pressed to equal last year’s total, but the picture will not be clear until the LIBOR deadline passes and the LIBOR backlog is cleared.

January production of original new loan pools was $552 million, significantly down from December’s record $878 million, November’s $765 million, and October’s $674 million, and approximately equal to the $550 million issued in January 2020.

January issuance divided into 39 first-participation or original pools, and 42 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, FHA mortgage insurance premiums, etc. Last month’s tail pool issuances totaled $189 million, below the typical $200-$250 million range.

Helped by historically low interest rates, lower default rates, and the reemergence of proprietary loans, the reverse mortgage market appears strong. However, this strength may soon be challenged by economic conditions and the transition out of LIBOR. The Constant Maturity Treasury “CMT” index is now the index for new adjustable rate HECM loans and will remain so until a transition to another index, likely the Secured Overnight Financing Rate, or “SOFR.”

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

HMBS December 2020 Part II: Mad Dash to the LIBOR Exit

Tuesday, January 12th, 2021

Outstanding HMBS rose by $412 million in December 2020, as issuers rushed to issue new LIBOR pools. After February 2021, GNMA will no longer allow issuance of HMBS pools backed by first participations of LIBOR-indexed loans. Payoffs fell slightly to approximately $900 million. Total outstanding HMBS rose again, to just under $56 billion, the highest total in over two years.

In 2019, HMBS posted its lowest annual issuance total in five years. But 2020’s low interest rates and higher lending limit boosted production to a near-record $10.6 billion. The industry may struggle in 2021 to reach similar levels of production.

“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. Each month fewer and fewer of these peak issuance loans remain, so fewer HECM loans reach their 98% Maximum Claim Amount (“MCA”) buyout threshold. Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases totaled $230 million, a 6-year low. 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. With buyouts at less than one-third their peak level, Peak Buyout is long gone.

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

2020 Full Year HMBS Issuer League Tables – Consistent AAG Takes the Win

Monday, January 4th, 2021

AAG maintained its #1 HMBS issuer ranking to lead all issuers in 2020 with $2.823 billion of issuance and 26.5% market share. This is the second consecutive year AAG has taken the crown. FAR jumped two notches into second place for the year with $1.869 billion issued and 17.55% market share. Longbridge dropped to third, just behind FAR, with $1.865 billion issued and 17.52% market share, and RMF was fourth with $1.822 billion issued and 17.1% market share. PHH Mortgage stayed in fifth for the year, with $1.352 billion and a 12.7% market share. These five issuers continue to account for 91+% of all HMBS issuance. There were 13 active HMBS issuers in 2020.

2020Q4 saw $3.04 billion of HMBS issued, slightly off third quarter’s $3.16 billion but up significantly from second quarter’s $2.35 billion and first quarter’s $2.09 billion. With HMBS capital markets recovered from the Coronavirus pandemic, HECM origination volume up, and a last-minute surge of LIBOR-based HMBS issuance before conversion to CMT, 2020 HMBS volume crossed $10.6 billion, second only to 2010’s $10.8 billion. While the industry got a 12th hour, 2-month reprieve, time will soon tell how Ginnie Mae’s decision to end LIBOR as an index for new HMBS pools backed by first participations will affect volume.

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

HMBS December 2020: Santa Grants Every Wish in Record Breaking Month

Monday, January 4th, 2021

HMBS issuance totaled $1.2 billion in December 2020, as issuers continued their mad rush to originate and securitize LIBOR-indexed HECM loans before the demise of that index. It turns out December 2020 will not be the last month in which Ginnie Mae allows pooling of new HMBS pools backed by first participations of LIBOR-based HECMs either; the deadline was extended through February. 97 pools were issued in December, of which 79 were LIBOR pools.

A near-record $10.6 billion in HMBS was issued in 2020, easily beating last year’s total of $8.3 billion, 2018’s $9.6 billion, even eclipsing the $10.5 billion in 2017. 2010 remains the all time HMBS volume year with $10.8 billion issued, when Principal Limits were high, full draw fixed rate was all the rage, and no borrower financial assessment safeguards had been established.

December production of original new loan pools was a record $878 million, compared to November’s production of $765 million, October’s $674 million, September’s $693 million, August’s $666 million, July’s $691 million, $593 million in June, $586 million in May, $470 million in April, and $484 million in December 2019. Last month’s new loan pool issuance exceeded the previous record of $834 million, set in April 2013.

December issuance divided into 47 first-participation or original pools, and 50 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, FHA mortgage insurance premiums, etc. Last month’s tail pool issuances totaled $210 million, within the typical $200-$250 million range.

In January 2020 we posed three questions for the year: what happens to LIBOR, what happens to HECM, and will private reverse mortgage production surpass HECM production.

The transition away from LIBOR remains uncertain. Yes, Ginnie Mae will stop securitizing new issue LIBOR based HECMs in March, but what about existing tail issuance? The Constant Maturity Treasury “CMT” index will return as the index for adjustable rate HECM loans, at least until a transition to another index, likely the Secured Overnight Financing Rate “SOFR,” occurs. However, no new first-participation CMT pools have been issued for many years. How will the capital markets respond? Will HUD transition away from LIBOR directly to SOFR, and if so when?

HECM was a bright spot for the industry in 2020. Origination volume soared, borrowers realized increased proceeds from historically low interest rates, the MMI Fund improved dramatically, and HUD, lenders, and NRMLA brought about meaningful borrower protections in the face of the Coronavirus pandemic.

Private production fell off in 2020, due mostly to lower interest rates for HECMs. Why couldn’t private product match the interest rate drops HECM enjoyed? Now, private product must also compete with an even higher Maximum Claim Amount of $822,375, in effect starting January 1. Will private loan volume ever match HECM?

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