Archive for the ‘Uncategorized’ Category

October 2018 HMBS: Scary Seasonal Mask Hides Market Decline

Friday, November 9th, 2018

HMBS float grew in October thanks to a large issuance of highly seasoned collateral. Despite over $1 billion in payoffs, HMBS ended the month at $55.5 billion, up from about $55.3 billion at the end of September. HMBS issuance was also just over $1 billion, $473 million of which accounted for by three large highly seasoned issues. HMBS float has been range-bound between $55 billion and $57 billion, but could fall below that soon as payoffs usually outweigh issuance of new pools and negative amortization of existing pools.

Production of original new loan pools was about $325 million, down from September’s $360 million and August’s $344 million totals. Last month’s tail pool issuances totaled $220 million, within the range of recent tail issuance. In October 2017, HMBS issuers sold 107 pools totaling $913 million, of which $615 million was original new loan pools.

October 2018 issuance divided into 43 original pools and 56 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.

We predicted earlier this year “we may be at Peak Buyout, and see a relative decline in Mandatory Buyouts in the near future.“ 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 have exceeded $1 billion per month for 12 of the last 15 months as many loans reached 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 accounted for $632 million, or about 65%, of the payoffs last month. This continues a downward trend from August’s record of $869 million.

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

HMBS April 2018 Part II: Temporary Reprieve from Supply Shrinkage; Are We at Peak Mandatory Buyout?

Thursday, May 10th, 2018

HMBS supply rose in April, increasing by nearly $360 million from $56.2 to $56.5 billion. High prepayments were outweighed by high issuance, including two large highly seasoned pools totaling $542 million. Without these seasoned pools, HMBS supply would have declined by over $180 million.

We noted in our 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 was a measly $401 million, but with the seasoned pools and strong tail issuance HMBS securitization volume rose to $1.2 billion, the seventh highest HMBS monthly issuance level ever.

We estimate that negative amortization of outstanding pools totaled $210 million, slightly exceeding last month’s record. Despite the $1.057 billion in payoffs (5th highest ever), total outstanding HMBS float rose $358 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 Recursion show about $676 million of the payoffs resulting from Mandatory Buyouts, the second highest total ever. However, for the second 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. We may be at “Peak Buyout,” and see a relative decline in Mandatory Buyouts in the near future.

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

2018Q1 HMBS Issuer Rankings – Seasoned Collateral Makes The Difference

Monday, April 2nd, 2018

RMF surged to the top of the leaderboard in 2018Q1, issuing almost $1.1 billion of HMBS securities for a 36.4% market share, $491 million over #2 AAG’s $587.2 million and 19.8% market share. RMF’s totals include the issuance of highly seasoned pools in February. FAR stays in third with $453 million issued and 15.3% market share. Ocwen Loan Servicing and Live Well Financial again round out the top five issuers. Ocwen issued $223 million for a 7.5% market share, and Live Well was fifth with $209 million issued for a 7% market share. The top five issuers accounted for 86% of all issuance, up 6% over last quarter. There were 15 active HMBS issuers in the first quarter.

The first quarter totaled $2.97 billion of HMBS, 28% of calendar 2017’s entire issuance, though this belies the true story. Unless highly seasoned HMBS becomes the norm, expect much lower volume for the remainder 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 totaled $10.5 billion for 2017, just $160 million shy of 2010’s record year of $10.7 billion; those are likely to remain in the record books for the foreseeable future.

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

HMBS October 2016: No October Surprise

Thursday, November 17th, 2016

HMBS issuers created 100 pools in October, keeping pace with September and again aided by seasoned pool issuance. Production of original new loan pools fell to $487 million, down sharply from September’s $624 million but in line with the $467 million issued in August. Issuance totaled approximately $832 million in October, the fourth highest monthly dollar volume this year, down just slightly from the September’s $836 million tally. The pool tally divided into 47 original pools and 53 tail pools. October’s HMBS issuance included two highly seasoned original pools totaling $136 million.

Original pools are those HMBS pools backed by the first participation in a previously uncertificated HECM loan. Tail HMBS issuances are HMBS pools consisting of subsequent participations. In other words, tail pools are created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance. October’s tail issuance was about $209 million, typical of this year’s production.

Total outstanding HMBS ticked up to just under $55 billion, up about $111 million from September. We estimate that October HMBS was composed of approximately $171 million in negative amortization, plus the $832 million in new issuance, minus a record $891 million in payoffs. Payoffs have exceeded new issuance in 4 of the last 5 months. Payoffs continue to climb as more seasoned HECM loans liquidate or reach 98% of their Maximum Claim Amount.

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

Blast from the Past lifts HMBS Issuance to 18-Month High

Monday, June 15th, 2015

HMBS issuers created $874 million in new HMBS pools during May 2015, the largest HMBS issuance since November 2013, up from $798 million in April, and substantially higher than May 2014’s $582 million. 105 pools were issued, consisting of 62 original issuances and 43 tail pools. May’s higher totals were driven by Reverse Mortgage Funding, LLC’s issuance of 3 new pools backed by highly seasoned CMT loans totaling $121 million. Thus far in 2015, HMBS issuance is averaging just over $736 million per month, well above 2014’s $550 million monthly average.

As we noted last month, FHA’s new Financial Assessment requirements for newly originated HECM loans will certainly reduce new loan supply, at least in the short run. Given the lag between loan origination and securitization, it will take a few months before we know the full impact.

Total outstanding HMBS is about $51.4 billion, up from $50.9 billion at the end of April. We estimate this increase is composed of approximately $160 million in negative amortization, plus the $874 million in new issuance, minus about $625 million in payoffs. If monthly issuance falls back below $500 million, total HMBS outstanding could shrink for the first time.

Original HMBS pools are created when a pool of FHA-insured Home Equity Conversion Mortgages (“HECMs”) is securitized for the first time. Tail HMBS issuances are HMBS pools created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance. Tail Issuances accounted for about $150 million, about 17% of May’s total. Newly originated loans comprise a large majority of HMBS issuance in any given month. As a result, HMBS issuance is a good barometer of recent HECM production.

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

HMBS Issuance Strong in April 2015 But Challenges Loom

Sunday, May 17th, 2015

HMBS issuers created $798 million in new HMBS pools during April 2015, the largest HMBS issuance since December 2013, up from $660 million in March, and substantially higher than April 2014’s paltry $396 million. 113 pools were issued, consisting of 63 original issuances and 50 tail pools. Thus far in 2015, HMBS issuance is averaging just over $700 million per month, well above 2014’s $550 million monthly average.

However, new regulations may prevent HMBS issuers from maintaining this healthy clip. FHA’s Financial Assessment requirements for newly originated HECM loans will certainly reduce loan volume for the foreseeable future. Given the lag between loan origination and securitization, it will take a few months before we know the full impact.

Total outstanding HMBS is $50.9 billion, up from $50.7 billion at the end of March. We estimate that this increase is composed of $159 million in negative amortization, plus the $798 million in new issuance, minus about $650 million in payoffs. If monthly issuance falls back below $500 million, total HMBS outstanding could shrink for the first time.

Original HMBS pools are created when a pool of FHA-insured Home Equity Conversion Mortgages (“HECMs”) is securitized for the first time. Tail HMBS issuances are HMBS pools created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance. Tail Issuances accounted for $155 million, about 19% of April’s total. Newly originated loans comprise a large majority of HMBS issuance in any given month. As a result, HMBS issuance is a good barometer of recent HECM production.

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

HMBS Starts Off Strong in 2015

Thursday, February 19th, 2015

HMBS issuers sold $712 million in new pools during January 2015, the highest total since December 2013. Issuance climbed nearly 10% from December 2014 and slightly exceeded the $711 million total of January 2014. This marks the fourth straight month that issuance has exceeded $600 million. With interest rates still low and financial assessment postponed, we expect this trend to continue.

Tail issuance accounted for over 23% of January’s total dollar amount, and half of the 106 pools issued.

Issuers are benefitting from both the higher PLFs enacted in August 2014 and relatively large borrower draws, as loans originated with utilization caps reach their 13th month, when draw restrictions expire.

Fixed rate issuance comprised only 25% of total HMBS issuance in January 2015, reflecting the typical product mix brought on by FHA’s program changes.

Newly originated loans comprise a large majority of HMBS issuance in any given month, and a very large majority of current production HECM loans are securitized into HMBS. As a result, HMBS issuance is a good barometer of recent HECM production.

Overall Ginnie Mae issuance is down significantly, with $313 billion issued in 2014, compared to just over $417 billion in 2013. (These figures include both forward and reverse, Ginnie Mae I and Ginnie Mae II securities.)

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

HREMIC 2014 First Half Issuance

Monday, June 30th, 2014

HREMIC issuance for the first half of 2014 was $2.37 billion, with 12 transactions underwritten by 4 different sponsors.  Bank of America Merrill Lynch continues its reign as market leader with a 43% market share, issuing a little over $1 billion of HREMICs.  RBS was second with 3 issuances totaling $741.7 million, and Stifel was third with 3 transactions for $472.4 million.  Nomura rounded out the pack with one transaction for $138.4 million.

First half issuance is roughly on pace with 2013 volume.  For all of 2013, 6 underwriters sponsored 26 transactions for $4.9 billion.  The record was 2012, when 31 transactions were issued for slightly more than $6 billion.

HREMIC collateral consists of HMBS, which are Ginnie Mae guaranteed pass-through securities.  HMBS are backed by pools of participations of HECMs, which are FHA-insured reverse mortgages.  This double layer of government guarantee, combined with the relatively high coupon and favorable prepayment patterns of the underlying loans, results in very favorable execution, even when compared to other Ginnie Mae “forward mortgage” securities.

New View Advisors compiled these rankings from publicly available Ginnie Mae data.

 

HMBS Issuer 2014Q1 League Tables – How Long Will RMS Stay On Top?

Wednesday, April 9th, 2014

Once again, RMS led all HMBS Issuers in the first quarter of 2014 with $414.7 million of securities for a 24% market share.  RMS has been the consistent leader of HMBS issuance the last three years.  Urban Financial, AAG, Liberty, and Generation rounded out the top 5 with $353.7 million, $275.0 million, $226.6 million, and $123.7 million respectively.  There were 13 different issuers, with new entrant RMF contributing $8.5 million of HMBS this quarter.  Despite lower volume, this is the highest number of issuers for a given quarter since the program began in 2007.  Of the total $1.7 billion of issuance, 23% or just under $400 million were tail issuances, 111 of the 248 pools issued.

Fixed rate HMBS totaled $439 million for the quarter, 26% of total issuance.  Along with the fourth quarter of 2013, this is the lowest percentage of fixed rate HMBS issued in a quarter since the early days of Ginnie Mae’s HMBS program.  By comparison, 47% of total production was fixed rate for all of 2013, and 65% of total production was fixed rate in 2012.  Of the $1.27 billion of adjustable rate HMBS, just $14.6 million was CMT based, the rest being LIBOR indexed HMBS.

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

Ed Gainor

Monday, August 1st, 2011

All of us at New View Advisors join our friends at Bingham McCutchen and the entire securitization community in mourning the loss of Ed Gainor, who passed away on July 22nd. Ed was a securities lawyer par excellence, and he was instrumental in the birth of the reverse mortgage capital markets. Ed was a teacher and mentor to many securitization lawyers who, we have no doubt, will carry the torch for reverse mortgages and securitization.

Ed did not flinch when asked to lead the legal team for the first reverse mortgage securitization in 1999. It was a daunting task. The legal hurdles seemed as insurmountable as the financial puzzle: the form the trust would take, how it would accommodate borrower draws, and how it could accommodate a unique FASIT tax vehicle. These were all unanswered questions that Ed, along with his partners and his team, tackled one by one. I remember well Ed’s enthusiasm on the closing day: “Let’s close the first reverse mortgage securitization right now!”

This was just one of Ed’s many accomplishments. He was the rare professional who could execute transactions, solve problems, but also take a step back and say: “Where do we go from here?” He was a leader in preparing the securitization industry for its next phase. I hope we do right by him. Ed Gainor was a most excellent lawyer, raconteur, and good friend. R.I.P.