Archive for the ‘Uncategorized’ Category

HECM Endorsement Analytics – December 2020

Tuesday, January 5th, 2021

HUD’s December 2020 HECM Endorsement Summary Report shows a moderate rebound of endorsement activity to finish the year, our summary of which can be found here: NV Endorsement 2020_12. 4,097 HECM loans were endorsed in December, a 15% increase over November. Endorsements totaled 44,661 units in 2020, compared to 32,472, 41,683, and 55,239 units in 2019, 2018, and 2017 respectively.

The HECM market has become further concentrated between a few large lenders. During 2020, the top four originators accounted for 58.7% of all HECMs, up from 54.4% in 2019. Apart from One Reverse Mortgage, which ceased HECM lending in February, there have been no major shifts in originator rankings.

One notable development for 2020 was the increase in HECMs accounted for as a refinancing. HUD’s November Endorsement Snapshot Report shows refinancings accounting for almost 25% of HECM endorsements. The same metrics for 2019, 2018, and 2017 were 7%, 7%, and 16%, respectively.

New View Advisors continues to offer its Who Buys What From Whom (WBWFW) report as part of our endorsement report subscription. The report compiles publicly available Ginnie Mae data to show which HMBS issuers buy HECMs from which lenders. The WBWFW report includes:

♦Top Originators – a ranking by original HECM UPB of all lenders over the last twelve months
♦WBWFW – an alphabetical cross-reference between every lender and the HMBS issuer that securitizes its loans
♦Top 100 Trends – a breakdown of loan sales by month, by Top-100 lender, by HMBS issuer.

Edited samples from this month’s WBWFW report are at the end of our endorsement writeup. These reports together provide accurate insight for sales and marketing teams to learn just who’s buying what from whom. The dataset is more complete and timely than what endorsement analysis alone can show.

HECM Endorsement Analytics – June 2020

Wednesday, July 1st, 2020

HUD’s June 2020 HECM Endorsement Summary Report shows another strong print with a total of 4,209 endorsements, our summary report of which can be found here: NV Endorsement 2020_06. June is lower than May’s 5,038 count, but as mentioned previously the last two months’ volume figures have been skewed by disruptions caused by COVID-19. During the six months prior to the pandemic, average monthly endorsements ran slightly over 3,000 units per month.

Based on 12-month endorsement totals, there is little change in the ranking of top lenders. Of note, High Tech Lending saw a sharp increase in volume, to 169 units from last month’s 24. One Reverse Mortgage had just 1 endorsement as it winds down business.

HUD’s May Endorsement Snapshot Report is now available on its website. The report echoes last month’s Endorsement Summary Report and displays a strong rebound in activities from April to May across the board.

Refinance volume continues to ramp higher. After taking a breather in May, the refinance endorsement count reached 891, the highest monthly total since January 2018. Refinance volume accounts for about 18% of all endorsements, a trend that started in late 2019.

Edited samples from this month’s WBWFW report are again at the end of our endorsement writeup. Our WBWFW reports provide accurate insight for sales and marketing teams to learn who’s buying what from whom. The dataset is more complete and timely than what endorsement analysis alone can show.

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

Sunday, May 10th, 2020

Outstanding HMBS rose by $185 million in April, as payoffs fell and issuance rose. Payoffs totaled approximately $800 million, down $50 million from last month. For several months, total outstanding HMBS has stayed at about $54 billion, 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. Until last month, low interest rates and a higher lending limit boosted production significantly, while Mandatory Buyouts continue to fall. With the current Coronavirus pandemic crisis, financial markets are dislocated: will this upset the equilibrium at last?

We predicted continuing declines in Mandatory Buyouts, and April was case in point, with Buyout dollar volume again at 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 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 $400 million, the lowest amount in nearly 5 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.

HECM Endorsement Analytics – March 2020

Thursday, April 2nd, 2020

HUD’s March 2020 HECM Endorsement Summary Report shows a total of 2,913 endorsements, 14% lower than last month’s 3,386, despite rates heading still lower again. Our summary report can be found here: NV Endorsement 2020_03.

Among the big movers, AAG endorsed 799 loans, up 16% from last month’s 691 loans. Liberty Reverse Mortgage endorsed 235 loans, less than half of last month’s 582 unit count. Mutual of Omaha Mortgage’s endorsement count also slipped, from 177 to 135 units month over month.

HUD’s February Endorsement Snapshot Report is now available on its website. Liberty sponsored 595 loans originated by another lender. FAR, RMF, and AGG followed behind with 399, 236, and 137 loans, respectively. Fairway sold 150 loans to another sponsor, more any other month during the past 12 months. Ennkar continued to be a strong seller again this month with 68 loans.

Of course, the current reports barely reflect any impact the Coronavirus pandemic will have on reverse mortgage originations starting in mid-March. Lending activities have stalled, and the secondary market has pulled back for HMBS, HREMIC, and related transactions. Expect materially weaker prints in the coming months.

New View Advisors continues to offer its Who Buys What From Whom (WBWFW) report as part of this endorsement report subscription. The report compiles publicly available Ginnie Mae data to show which HMBS issuers buy HECMs from which lenders. The WBWFW spreadsheet includes:

  • Top Originators – a ranking by original HECM UPB of all lenders over the last twelve months
  • WBWFW – an alphabetical cross-reference between every lender and the HMBS issuer that securitizes its loans
  • Top 100 Trends – a breakdown of loan sales by month, by Top-100 lender, by HMBS issuer.

Edited samples from this month’s WBWFW report are at the end of our endorsement writeup. These reports together provide accurate insight for sales and marketing teams to learn just who’s buying what from whom. The dataset is more complete and timely than what endorsement analysis alone can show.

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

Tuesday, March 10th, 2020

Outstanding HMBS rose by $72 million in February, as lower payoffs were once again balanced by a strong issuance month. Payoffs totaled approximately $800 million, down about $100 million from last month. Total outstanding HMBS remains at $54.1 billion, an equilibrium in which new issuance and interest roll-up roughly equal payoffs.

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

We predicted continuing declines in Mandatory Buyouts, and February was a case in point, with Buyout dollar volume at 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. From now on, billion-dollar-plus payoff months will be the exception rather than the rule. 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 $421 million, the lowest amount in nearly 4 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.

2019 HMBS Issuer League Tables – No Surprises

Friday, January 3rd, 2020

AAG kept its frontrunner HMBS issuer position throughout 2019, ending the year with $1.97 billion of issuance and 24% market share. It’s worth noting AAG’s issuance totals are all new originations and tails, with no highly seasoned pools issued. Longbridge finished in second place with $1.72 billion of issuance and 21% share, including more seasoned HMBS issuance in Q4. RMF stayed in third with $1.50 billion issued and 18% market share, which includes issuance assumed from the Live Well Financial bankruptcy. FAR was fourth with $1.21 billion issued and 14.7% market share, and PHH Mortgage Corp placed fifth with $962 million and 11.7% market share. These five issuers accounted for 89.2% of all issuance, inching closer to the Top-5 concentration high of 91% at year-end 2018. There was no change in rankings order from Q3, and all 14 HMBS issuers were active during the quarter.

2019Q4 saw $2.28 billion of HMBS issued, down slightly from Q3’s $2.33 billion, but on the upward trajectory seen all year. Nonetheless, at $8.26 billion, annual industry volume was off almost 14% from a year ago. Total HMBS issuance in 2018 was $9.58 billion.

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

HMBS September 2019: Back to School Special

Tuesday, October 1st, 2019

HMBS issuance totaled nearly $610 million in September, as lower rates continued to strengthen new production. 83 pools were issued in September, including about $393 million of new unseasoned HECM first participation pools, the highest monthly total for new production this year. For comparison, HMBS issuers sold 104 pools totaling $588 million in September 2018.

However, reverse mortgage lenders still face reduced volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of fiscal year 2018. Even with this month’s issuance, the HMBS market is on pace to issue less than $8 billion in calendar 2019. HMBS issuance totaled $9.6 billion in 2018 and $10.5 billion in 2017.

September’s production of original new loan pools was about $393 million, compared to $390 million in August, $321 million in July, $331 million in June, $325 million in May, $300 million in April, $277 million in March, $274 in February, and $304 million in January. Last month’s tail pool issuances totaled $217 million, on the low end of the range of recent tail issuance. As we predicted two months ago, the industry is likely seeing the benefit of lower interest rates helping new origination volume.

September 2019 issuance divided into 28 First-Participation or Original pools and 55 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 can generate profits for years, helping HMBS issuers during challenging times.

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

HECM Endorsement Analytics – August 2019

Wednesday, September 4th, 2019

HUD’s August 2019 HECM Endorsement Summary Report shows a total of 2,341 endorsements, 15% lower than July’s 2,754 units, a summary of which can be found here: NV Endorsement 2019_08. Monthly endorsement volume has been fluctuating around 2,500 units since March of 2019. If the industry maintains this pace next month, we’ll tally only about 31,000 endorsements for fiscal year 2019, substantially lower than FY2018’s 48,359 units and the 55,332 units from FY2017.

Fairway sold 112 of its originations to another sponsor in August. Over the last 12 months Fairway has originated 951 such loans endorsed by HUD, the leader by far in this sub-market. Finance of America Reverse kept its lead in sponsoring loans originated by another lender. Over the last 12 months, FAR has sponsored 3,426 such loans. Liberty Home Equity Solutions and Reverse Mortgage Funding each sponsored more than 2,000 such loans over the last 12 months.

It is well known that American Advisors Group has a commanding lead in HECM endorsements. Over the past 12 months AAG’s overall monthly market share of endorsements has ranged between 23% and 32%. With loan level endorsement data we can dig deeper into the company’s geographic distribution. The following table shows that with the exception of five states and Puerto Rico, AAG has a 20% or greater market share in every state. For comparison, One Reverse Mortgage and Finance of America Reverse, who hold second and third place based on last-12-month endorsement volume, each have an approximate 8% market share nationwide. Interestingly, AAG has a slightly smaller lead in California where there’s the largest number of HECM endorsements, with an 18% market share. AAG’s dominance in the South and Midwest is substantial, with 64%, 62%, 57% and 57% respectively in West Virginia, South Dakota, Kentucky and North Dakota.

HMBS June 2019 Part II: HMBS Float Resumes Shrinkage

Thursday, July 11th, 2019

Outstanding HMBS fell by nearly $200 million in June, as low issuance, high payoffs, and an absence of highly seasoned issues took their toll. Payoffs once again totaled just under $1 billion. Total outstanding HMBS fell to just over $54.2 billion, a three-year low. HMBS float is now $2.2 billion below its peak a year ago.

Total HMBS float will likely fall further given current trends. As we noted earlier this week, HMBS issuance in the first half of 2019 was the lowest half-year of issuance in five years.

We predict continuing declines in Mandatory Buyouts in the foreseeable future. “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 or repaid by borrowers. From now on, billion-dollar-plus payoff months will be the exception rather than the rule. Many HECM loans continue to reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”), but Peak Buyout appears to have ended.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $600 million, or about 64%, of the payoffs last month. This tracks May’s numbers very closely and continues a gradual downward trend from the buyout peak in last year’s third quarter, 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.

Financial Assessment Is Working (Part V)

Thursday, June 27th, 2019

Financial Assessment is still working. Now in its fifth year, FHA’s new policy of requiring the financial assessment (“FA”) of the borrower’s ability to pay has cut tax and insurance default by over three quarters and serious defaults by over two-thirds. These results continue to validate the encouraging data we shared in past analyses.

FHA’s objective for the new Financial Assessment regulations was to reduce the persistent defaults, especially Tax and Insurance defaults, plaguing the HECM program. As FHA put it, “… an increasing number of tax and hazard insurance defaults by mortgagors led FHA to establish … a requirement for a Financial Assessment of a potential mortgagor’s financial capacity and willingness to comply with mortgage provisions.” Financial Assessment requirements became effective for HECMs with case numbers issued on or after April 27, 2015. Since then, HECM lenders must make a financial assessment of the borrower’s ability to meet their obligations, including property taxes and home insurance. Tax and Insurance (T&I) and other defaults can lead to foreclosure and result in significant losses to FHA, HMBS issuers and other HECM investors. Defaults rose steadily during the financial crisis and have remained a thorn in the side of the program.

It’s been over four years since Financial Assessment began, so we should be able to measure the effect of this policy by comparing the default rates of loans originated before and after the FA rule was implemented.

With this in mind, New View Advisors looked at a data set of just over 200,000 HECM loans, comparing loans originated in the immediate 45 month post-FA period from July 2015 through March 2019 to loans originated in the 45 month pre-FA period from July 2011 through March 2015. After July 2015, there were few (if any) loans originated under the pre-FA guidelines. As the guidelines took effect in April 2015, the second quarter of 2015 included a mix of FA and pre-FA loans.

The data show a very strong reduction in Tax and Insurance Defaults in the post-FA period. After 45 months, the pre-FA data set shows a T&I default rate of 3.6%, and an overall serious default rate of 5.2%. By contrast, the post-FA data set shows a T&I default rate of approximately 0.7%, and an overall serious default rate of 1.5%. For the purpose of this analysis, we define serious defaults as T&I defaults plus foreclosures plus other “Called Due” status loans.

Over the past few years, FHA has taken a number of steps to reduce defaults in its HECM program. These include Mortgagee Letter 2013-27, which limits in certain cases the amount that can be lent in the first 12 months. Also, a series of Principal Limit Factor (“PLF”) reductions has reduced the amount lent even when the loan is fully drawn. These changes have also helped, although the majority of serious early defaults are Tax and Insurance defaults.

Given these results, we once again give the Financial Assessment concept high marks for reducing defaults. Previously, we referred to these results as a “mid-term grade that needs to be tested further as the post-FA portfolio ages.” At this point, four years constitutes at least one full semester in a HECM loan’s life-cycle, and we grade Financial Assessment’s performance as a solid “A.”

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