Archive for the ‘HMBS’ Category

HMBS September 2020 Part II: HMBS Supply Rises, For Now

Friday, October 9th, 2020

Outstanding HMBS increased by $141 million in September, as payoffs rose and new issuance remained strong. Payoffs were just under $880 million, despite the continued fall of mandatory buyouts. Total outstanding HMBS rose to over $55.3 billion, the highest total in 23 months. Two months ago we asked: is this is the end of the HMBS range-bound equilibrium of the last year and a half, in which HMBS issuance and interest roll-up roughly equaled payoffs? For the time being, yes it is. For the past two months, HBMS issuance and payoffs have been roughly equal, so supply has increased approximately by the amount of interest roll-up.

In 2019, HMBS posted the lowest annual total in five years. But 2020 is shaping up differently. In recent months, low interest rates and a higher lending limit boosted production significantly, while mandatory buyouts continue to fall. This trend will likely continue for the rest of 2020 as HMBS issuers rush to beat the year-end LIBOR deadline, after which no new first-participation LIBOR pools may be issued. Beginning in 2021, the industry may struggle to reach the same 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 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: the 98% MCA mandatory purchases totaled $253 million, yet another 5-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 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.

2020Q3 HMBS Issuer League Tables – AAG Heading into the Stretch

Friday, October 2nd, 2020

AAG maintained its #1 HMBS issuer ranking through three quarters of 2020 with nearly $2 billion of issuance and 26.3% market share. Longbridge leapfrogged into second place for the quarter with $1.44 billion issued and 18.9% market share. RMF dropped to third, with $1.32 billion issued and 17.3% market share, and FAR was fourth with $1.31 billion issued and 17.3% market share. PHH Mortgage fell to fifth, with $886 million and 11.7% market share. These five issuers continue to account for 91% of all HMBS issuance. There were 12 active HMBS issuers in 2020Q3.

2020Q3 saw $3.16 billion of HMBS issued, up from second quarter’s $2.35 billion and first quarter’s $2.09 billion. With HMBS capital markets recovered from the Coronavirus pandemic, and HECM origination volume up, 2020 HMBS issuance is on trajectory for close to $10 billion. As mentioned in our previous blog, 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 September 2020: Sorrow for the Lost LIBOR; Quoth Ginnie Mae: “Nevermore”

Thursday, October 1st, 2020

HMBS issuance totaled $883 million in September 2020, marking another banner month, but overshadowed by Ginnie Mae’s announcement ending LIBOR as an index for new HMBS pools backed by first participations of HECM loans. Helped by a recovered capital market and low interest rates, HMBS issuers continued a streak of robust production. 79 pools were issued in September.

Reverse mortgage lenders weathered a long period of reduced new origination volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of FY2018. But HECM production steadily recovered, and now new production of HMBS exceeds its long-term average range of $500 – $600 million. Helped not only by historically low interest rates, but also lower default rates and the reemergence of proprietary loans, the reverse mortgage market is stronger than ever. However, this strength may soon be challenged by economic conditions and the transition out of LIBOR.

So far, $7.6 billion in HMBS has been issued in 2020, on track to beat not only last year’s total of $8.3 billion for calendar year 2019, but possibly 2018’s $9.6 billion total, as a mad rush ensues to issue LIBOR HMBS before the clock runs out. Even 2017’s record total issuance of $10.5 billion is in reach with a few more months of strong production. Also, securitization of private reverse mortgages is a much bigger factor now. We estimate that the total issuance of reverse mortgage securities backed by new collateral in 2019 was about the same as 2018. Private reverse mortgage lenders who had suspended their program have resumed lending, and private label securitizations are being issued by multiple issuers.

September production of original new loan pools was about $693 million, compared to August’s $666 million, July’s $691 million, $593 million in June, $586 million in May, $470 million in April, $455 million in March, $501 million in February, and a mere $393 million in September 2019.

Last month’s tail pool issuances totaled $191 million, slightly below the typical $200-$250 million range.

September issuance divided into 35 first-participation or original pools and 44 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.

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

HMBS August 2020 Part II: HMBS Supply Rises Again

Thursday, September 10th, 2020

Outstanding HMBS rose by about $146 million in August, as payoffs fell and issuance continued strong. Payoffs totaled just under $860 million, as mandatory purchases continued to fall. Total outstanding HMBS rose to over $55.2 billion, the highest total in 21 months. Last month we asked: is this the end of the HMBS range-bound equilibrium of the last year and a half, in which HMBS issuance and interest roll-up roughly equaled payoffs? August’s results say yes, it is.

In 2019, HMBS posted the lowest annual total in five years. But 2020 is shaping up differently. In recent months, low interest rates and a higher lending limit boosted production significantly, while Mandatory Buyouts continue to fall. August was a case in point, with strong new loan production and Buyout dollar volume falling further.

“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, so fewer HECM loans reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”). Peak Buyout is long gone.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases totaled $271 million, yet another 5-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.

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

HMBS August 2020: Summer of Love for New Issuance

Tuesday, September 1st, 2020

HMBS issuance totaled $859 million in August 2020, marking another banner month. Helped by a recovered capital market and low interest rates, HMBS issuers continued a streak of robust production. 80 pools were issued in August.

Reverse mortgage lenders weathered a long period of reduced new origination volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of FY2018. But HECM production steadily recovered, and now new production of HMBS exceeds its long-term average range of $500 – $600 million. Helped not only by historically low interest rates, but also lower default rates and the reemergence of proprietary loans, the reverse mortgage market is stronger than ever. However, this strength may soon be challenged by economic conditions and the transition out of LIBOR.

So far, $6.7 billion in HMBS has been issued in 2020, on track to beat not only last year’s total of $8.3 billion for calendar year 2019, but probably 2018’s $9.6 billion total. Even 2017’s total issuance of $10.5 billion is in reach with a few more months of strong production. Also, securitization of private reverse mortgages is a much bigger factor in overall origination volume. We estimate the total issuance of reverse mortgage securities backed by new collateral in 2019 was about the same as 2018. Private reverse mortgage lenders that suspended programs have resumed lending, and private label securitizations are being placed by multiple issuers.

August production of original new loan pools was about $666 million, down slightly from July’s $691 million, but nonetheless impressive compared to $593 million in June, $586 million in May, $470 million in April, $455 million in March, $501 million in February, and a mere $390 million in August 2019.

Last month’s tail pool issuances totaled $193 million, again below the typical $200-$250 million range.

August issuance divided into 34 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, FHA mortgage insurance premiums, etc.

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

HMBS July 2020 Part II: About That Equilibrium …

Tuesday, August 11th, 2020

Outstanding HMBS rose by about $686 million in July, as payoffs fell and issuance continued to grow. Payoffs totaled approximately $877 million, as mandatory purchases continued to fall. Total outstanding HMBS rose to over $55 billion, the highest total in 18 months. Is this the end of the HMBS range-bound equilibrium of the last year and a half, in which HMBS issuance and interest roll-up roughly equaled payoffs?

In 2019, HMBS posted the lowest annual total in five years. But 2020 is shaping up differently. In recent months, low interest rates and a higher lending limit boosted production significantly, while Mandatory Buyouts continue to fall. July was a case in point, with buyout dollar volume falling amid strong loan production. Overall Ginnie Mae production was $70 billion in July, also a record, and up 48% from a year ago.

“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 HECMs remain, so fewer reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”). Peak Buyout is long gone.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases totaled $305 million, yet another 5-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.

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

HMBS July 2020: Fireworks Go Boom

Monday, August 3rd, 2020

HMBS issuance totaled $1.42 billion in July 2020, nearly a record month and the highest since February 2018. Strong new production and a large seasoned pool led the way. Helped by a continuing recovery in the capital markets and low interest rates, HMBS issuers easily surpassed June’s totals. 77 pools were issued in July.

Reverse mortgage lenders weathered a long period of reduced new origination volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of FY2018. But HECM production steadily recovered, and now new production of HMBS exceeds its long-term average range of $500 – $600 million. Combined with the dramatic fall in default rates and the reemergence of proprietary loans, the reverse mortgage market is stronger than ever. However, this strength may still be challenged by changes in future economic conditions and the transition out of LIBOR.

The HMBS market totaled about $8.3 billion for calendar year 2019, down from $9.6 billion in 2018 and $10.5 billion in 2017. However, securitization of private reverse mortgages is a much bigger factor now. As a result, we estimate that the total issuance of reverse mortgage securities backed by new collateral in 2019 was about the same as 2018. All private reverse mortgage lenders who had suspended their program have resumed lending.

July production of original new loan pools was about $691 million, compared to $593 million in June, $586 million in May, $470 million in April, $455 million in March, $501 million in February, $550 million in January, and a mere $321 million in July 2019.

Last month’s tail pool issuances totaled $175 million, below the typical $200-$250 million range.

July issuance divided into 37 first-participation or original pools and 40 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.

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

HMBS June 2020 Part II: HMBS Float Remains in Equilibrium Just Above $54 Billion

Thursday, July 9th, 2020

Outstanding HMBS fell by $15 million in June, as payoffs rose and issuance remained strong. Payoffs totaled approximately $927 million, consistent with average monthly payoffs over the last year. Total outstanding HMBS remains at $54.4 billion. Over the last year and a half, this HMBS total has been in a state of equilibrium where new issuance and interest roll-up roughly equal payoffs.

In 2019, HMBS posted the lowest annual total in five years. In recent months, low interest rates and a higher lending limit boosted production significantly, while Mandatory Buyouts continue to fall. But how long can this equilibrium last?

We predicted continuing declines in Mandatory Buyouts, and June was a case in point, with Buyout dollar volume still near its lowest level in nearly 5 years. “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. Many HECM loans continue to reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”), but Peak Buyout is long gone.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases totaled just $342 million, another 5-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.

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

2020Q2 HMBS Issuer League Tables – AAG Maintains Its Lead

Wednesday, July 1st, 2020

AAG maintained its lead in 2020Q2 HMBS issuer rankings, with $1.23 billion of issuance and 27.7% market share. RMF squeaked past FAR into second, with $842.7 million issued and 19% market share. FAR at third had $829.5 million issued and 18.7% market share. PHH Mortgage stayed in fourth, with $590.6 million and 13.3% market share, and Longbridge held fifth with $525.2 million of issuance and 11.8% share. These five issuers continue to account for almost 91% of all HMBS issuance. There remain 13 active HMBS issuers in 2020.

2020Q2 saw $2.35 billion of HMBS issued, up from the first quarter’s $2.09 billion. With HMBS capital markets recovered from the Coronavirus pandemic, and HECM origination volume up, 2020 HMBS issuance is headed for $9+ billion. Total HMBS issuance in 2019 was $8.26 billion.

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

HMBS June 2020: No June Swoon, Too Soon to Call It a Boom? High Noon with LIBOR Looms.

Wednesday, July 1st, 2020

HMBS issuance totaled $766 million in June 2020, with strong new production again leading the way. Helped by a recovery in the capital markets, HMBS issuers essentially equaled May’s strong total and surpassed May in new production issuance. 82 pools were issued in June. There were no highly seasoned pools issued.

Reverse mortgage lenders weathered a long period of reduced new origination volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of FY2018. Over the last year or so, new production of HECMs and HMBS grew back to its long-term average range of $500 – $600 million. Combined with the dramatic fall in default rates and the reemergence of proprietary loans, the reverse mortgage market is stronger than ever. However, this strength may be challenged by economic conditions and the transition out of LIBOR.

The HMBS market totaled about $8.3 billion for calendar year 2019, down from $9.6 billion in 2018 and $10.5 billion in 2017. However, securitization of private reverse mortgages is a much bigger factor now. As a result, we estimate that the total issuance of reverse mortgage securities backed by new collateral in 2019 was about the same as 2018. As further evidence of the recovery, a major private reverse mortgage lender who had suspended their program has resumed lending.

June production of original new loan pools was about $593 million, compared to $586 million in May, $470 million in April, $455 million in March, $501 million in February, $550 million in January, $484 million in December 2019, and a mere $331 million in June 2019.

Last month’s tail pool issuances totaled $172 million, below the typical $200-$250 million range.

June issuance divided into 36 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, FHA mortgage insurance premiums, etc.

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