Archive for the ‘HMBS’ Category

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.

HMBS November 2020 Part II: HMBS Supply Rises Again

Wednesday, December 9th, 2020

Outstanding HMBS rose by about $125 million in November, as both payoffs and new issuance continued strong. Payoffs remained at about $950 million, despite the lower level of mandatory buyouts. Total outstanding HMBS rose again, to over $55.5 billion, the highest total in over two years.

In 2019, HMBS posted its lowest annual issuance total in five years. But 2020 has shaped up differently; low interest rates and a higher lending limit boosted production significantly. This trend will likely continue for December 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 $254 million, just above September’s 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.

HMBS November 2020: Issuers Carve Up Big LIBOR Turkey but Few Leftovers Remain

Tuesday, December 1st, 2020

HMBS issuance totaled $956 million in November 2020, as issuers continued their mad rush to originate and securitize LIBOR-indexed HECM loans before the demise of that index. December 2020 will be the last month in which Ginnie Mae allows pooling of new HMBS pools backed by first participations of LIBOR-based HECMs. 85 pools were issued in November, of which 73 were LIBOR pools.

Helped by historically low interest rates, 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. The Constant Maturity Treasury “CMT” index will return as the index for adjustable rate HECM loans, at least until the transition to another index, likely the Secured Overnight Financing Rate (“SOFR”) occurs. No new, first-participation CMT pools have been issued for many years, and probably none will reappear until 2021.

$9.4 billion in HMBS has been issued through November 2020, already beating last year’s total of $8.3 billion. HMBS Issuers are on track to easily exceed 2018’s $9.6 billion total. 2017’s total issuance of $10.5 billion may be out of reach, but not by much.

November production of original new loan pools was $765 million, compared to October’s production of $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, $455 million in March, and $506 million in November 2019. Last month’s new loan pool issuance exceeded even November 2017’s high watermark of $755 million, when issuers were rushing to close loans prior to the implementation of Mortgagee Letter 2017-12.

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

November issuance divided into 44 first-participation or original pools, and 41 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 October 2020 Part II: HMBS Supply Rises, For Now

Tuesday, November 10th, 2020

Outstanding HMBS rose by about $50 million in October, as payoffs rose and new issuance remained strong. Payoffs increased to $950 million, despite the continued fall of mandatory buyouts. Total outstanding HMBS rose to over $55.4 billion, the highest total in two years.

In 2019, HMBS posted its lowest annual total in five years. But 2020 is shaping up differently. In recent months, low interest rates and higher lending limits boosted production significantly. 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 can 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, 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 $255 million, just above last month’s 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.

HMBS October 2020: HMBS Issuers Haunted by Ghost of LIBOR

Monday, November 2nd, 2020

HMBS issuance totaled $879 million in October, marking another banner month overshadowed by the pending demise of LIBOR as an HMBS index. December 2020 will be the last month in which Ginnie Mae allows pooling of new HMBS pools backed by first participations of LIBOR-based HECMs. 86 pools were issued in October.

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.

$8.5 billion in HMBS has been issued in 2020 through October, already beating last year’s total of $8.3 billion. HMBS Issuers are on track to exceed 2018’s $9.6 billion total, as a mad rush ensues to issue LIBOR HMBS before the clock runs out. 2017’s total issuance of $10.5 billion may be out of reach, but not by much.

October production of original new loan pools was about $674 million, compared to September’s $693 million, 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 $426 million in October 2019.

Last month’s tail pool issuances totaled $205 million, at the low end of the typical $200-$250 million range.

October issuance divided into 37 first-participation or original pools and 49 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 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.