Archive for the ‘Uncategorized’ Category

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.

HMBS May 2019 Part II: Seasoned Issuance Props up Float

Tuesday, June 11th, 2019

Outstanding HMBS rose slightly in May, avoiding further decline thanks to some highly seasoned new issuance. Despite just under $1 billion in payoffs, total outstanding HMBS edged up to just over $54.4 billion. This is down over $2 billion from its peak a year ago.

Total HMBS float will likely finally fall further given current trends. As we noted earlier this week, HMBS issuance was just over $855 million in May, including over $282 million from three highly seasoned new issues.

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. Although last month came close, 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 $599 million, or about 62%, of the payoffs last month. This is the first month since December 2017 where mandatory purchases have not exceeded $600 million, 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.

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.