HMBS June 2022 Part II: Refi Swoon Began in June

July 13th, 2022

HMBS payoffs fell in June, as the refinancing wave finally began its retreat. June payoffs totaled just over $1.1 billion, the lowest amount in over a year. Outstanding HMBS rose to a record $58.6 billion due to continued strong new issuance and a faster roll-up from rising interest rates.

The HECM refinance wave was assisted by the higher HECM lending limit (now $970,800) and surging home prices (nearly 20% year-over-year, according to some measures). Higher interest rates have finally caught up with the HMBS market, driving down principal limit factors (initial loan-to-value ratios) sharply.

June’s $1.1 billion payoff represents a 21% annual rate, still high by historical standards but bound to fall further in the third quarter. Given the lag between HECM loan origination and HMBS issuance, the new HECMs backing June’s HMBS pools still do not fully reflect the rapid rise in interest rates.

Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $279 million, 25% of the total.

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

2022 First Half HMBS Issuer League Tables – Crown Up For Grabs

July 5th, 2022

AAG remained the #1 HMBS issuer in Q2, with $1.848 billion issued and 21.7% market share, though FAR was less than $12 million away, issuing $1.836 million for a 21.6% market share. Longbridge remained in third with $1.558 billion issued and 18.3% market share, RMF stayed in fourth with $1.507 billion issued and 17.7% market share, and PHH rounded out the Top Five again with $1.150 billion issued for a 13.5% market share.

The Top Five issuers accounted for 93% of all HMBS issuance, down a percent from previous quarters. The same 12 HMBS issuers were again active in the quarter. Mutual of Omaha Mortgage moved up four notches to #7, its largest HMBS issuance tally to date, also explaining the slight drop in aggregate issuance volume for the Top Five issuers.

2022Q2 saw $4.43 billion of HMBS issued, up 9% from last quarter’s record $4.08 billion, and the sixth consecutive quarterly issuance record. That run may be over. However, as mentioned in past blogs, even with the anticipated issuance slowdown in the second half, total 2022 volume could still surpass 2021’s $13.2 billion issuance record.

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

HECM Endorsement Analytics – June 2022

July 5th, 2022

5,937 HECMs were endorsed in June, off 8.8% from the March high but up 2.7% from May. The next few months will certainly reveal the impact of rising rates and HPA burnout. Our complete report can be found here: NV Endorsement 2022_06.

HUD’s May Endorsement Snapshot Report was just released on its website. As previously noted, H2H Refis and Traditional HECMs have contributed equally to endorsement volume since late 2020. With rates rising and HPA slowing, HECM refinance volume will slow. Only the never-ending MCA lending limit increases every December can keep refi volume from falling of a cliff.

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.

HMBS June 2022: June Too Soon For Swoon, But End to Boon Looms

July 1st, 2022

HECM Mortgage-Backed Securities (“HMBS”) issuance fell in June to $1.3 billion, compared to $1.5 billion in May and April’s record $1.6 billion, as the refinancing wave continues to ebb. However, production remains strong by historical standards.

Given the lag between HECM loan origination and HMBS issuance, the new HECMs backing June’s HMBS pools do not fully reflect the rapid rise in interest rates over the past several months. The numbers for July issuance will likely show further declines.

HMBS issuance totaled $13.2 billion for 2021, smashing the previous record set in 2010. With only six months in the books and over $8 billion issued, HMBS is still on pace to set another new record in 2022.

June’s original (first participation) production fell to $1.1 billion, compared to $1.2 billion in May, and well below April’s record $1.4 billion in new issuance. Still, June’s original new loan pool production was close to March, which totaled $1.13 billion, February’s $1.12 billion and January’s $1.18 billion. Approximately $823 million in original new loan pools were issued a year ago, in June 2021.

100 pools were issued in June: 53 first-participation or original pools, and 47 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 and FHA mortgage insurance premiums. Last month’s tail pool issuances totaled $220 million, within the typical range.

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

New View Advisors and Recursion Reverse Mortgage Prepayment Indices – May 2022

June 9th, 2022

The New View Advisors and Recursion May 2022 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 05_2022. The indices are derived from underlying HECM data in HMBS made public by Ginnie Mae, as well as private sources. This new expanded set of prepayment data is calculated using dollar principal balance, not unit count.

The enhanced data set shows current trends in prepayment activity by product type and Principal Limit Factors (PLFs), and for current 12-month LIBOR PLFs by Expected Rate. HECM loans with higher Expected Rates originated in the year or so prior to the precipitous fall in interest rates brought on by the pandemic are experiencing higher prepayment rates. Therefore, we segregate indices for recent production 12-month LIBOR PLFs into Expected Rates greater than 4% and Expected Rates less than or equal to 4%.

Prepayment speeds are expressed as annualized percentages in three categories: Total Payoffs, Payoffs Other Than Assignments, and Payoffs from Assignment. For each category, we calculate the 1-month, 3-month, 6-month and 12-month CPR, or annual rate of prepayment.

HMBS May 2022 Part II: May Too Soon To Begin Swoon Which May Loom in June

June 9th, 2022

HMBS payoffs continued in May, as the refinancing wave refuses to ebb. Instead, May payoffs totaled $1.48 billion, just short of March’s 2022 record $1.5 billion. Outstanding HMBS rose to a record $58.3 billion with strong new issuance and a faster roll-up from rising interest rates.

HECM borrowers continue to refinance in large numbers, assisted by a higher HECM lending limit (now $970,800) and surging home prices (nearly 20% year-over-year, according to some measures). So far, rising interest rates have failed to calm this reverse mortgage refinancing wave. The nearly $1.5 billion in payoffs in May represents a 24.6% annual payoff rate.

Given the lag between HECM loan origination and HMBS issuance, the new HECMs backing May’s HMBS pools do not fully reflect the rapid rise in interest rates over the past two months. The numbers for June will test the resilience of this refinancing wave, which began with lower interest rates but continued its momentum from the strong home price appreciation and higher FHA lending limits.

2021 smashed all previous records with a $13.2 billion HMBS issuance total. 2021’s record may fall: over $7.1 billion was issued in the first five months of 2022.

Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $283 million, 22% of the total.

As a side note, this is New View Advisors’ 300th blog post since we started sharing analysis and observations about the reverse mortgage industry in 2009.  Your input and comments on any of our findings is always welcome.

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

HECM Endorsement Analytics – May 2022

June 6th, 2022

5,783 HECMs were endorsed in May, continuing a slow downward trend since March’s record-setting 6,510 endorsements. The May endorsement count is off 11.2% from the March high, and down 7.7% from April. The next few months will likely reveal the impact of rising rates and HPA burnout. Our complete report can be found here: NV Endorsement 2022_05.

HUD’s April Endorsement Snapshot Report was just released on its website. As previously noted, H2H Refis and Traditional HECMs have contributed equally to endorsement volume since late 2020. With rates rising and HPA slowing, HECM refinance volume should slow, though another bump to the MCA lending limits in December may well keep the refi party going into 2023. More positive media coverage, such as the recent WSJ article, could also spur a turnaround in consumer sentiment, leading to meaningful organic growth from first-time borrowers.

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.

HMBS May 2022: May Flowers Wither; June Gloom Looms

June 1st, 2022

HECM Mortgage-Backed Securities (“HMBS”) issuance fell in May to $1.45 billion, down from April’s record $1.6 billion, as the refinancing wave finally began to ebb. However, production remains strong by historical standards.

Given the lag between HECM loan origination and HMBS issuance, new HECMs backing May’s HMBS pools do not fully reflect the rapid rise in interest rates over the past several months. The numbers for June and July issuance will test the resilience of these high levels of HECM loan production, which are sustained by lower interest rates, strong home price appreciation and higher FHA lending limits.

HMBS issuance totaled $13.2 billion for 2021, smashing the previous record set in 2010. With only five months in the books and over $7 billion issued, HMBS is on pace to set another new record in 2022.

May’s original (first participation) production fell to $1.2 billion, well below April’s record of $1.4 billion in new issuance, but exceeding March’s production of original new loan pools totaling $1.13 billion, February’s $1.12 billion and January’s $1.18 billion. Approximately $862 million in original new loan pools were issued a year ago, in May 2021.

103 pools were issued in May: 60 first-participation or original pools, and 43 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 and FHA mortgage insurance premiums. Last month’s tail pool issuances totaled $211 million, within the typical range.

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

New View Advisors and Recursion Reverse Mortgage Prepayment Indices – April 2022

May 11th, 2022

The New View Advisors and Recursion April 2022 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 04_2022. The indices are derived from underlying HECM data in HMBS made public by Ginnie Mae, as well as private sources. This new expanded set of prepayment data is calculated using dollar principal balance, not unit count.

The enhanced data set shows current trends in prepayment activity by product type and Principal Limit Factors (PLFs), and for current 12-month LIBOR PLFs by Expected Rate. HECM loans with higher Expected Rates originated in the year or so prior to the precipitous fall in interest rates brought on by the pandemic are experiencing higher prepayment rates. Therefore, we segregate indices for recent production 12-month LIBOR PLFs into Expected Rates greater than 4% and Expected Rates less than or equal to 4%.

Prepayment speeds are expressed as annualized percentages in three categories: Total Payoffs, Payoffs Other Than Assignments, and Payoffs from Assignment. For each category, we calculate the 1-month, 3-month, 6-month and 12-month CPR, or annual rate of prepayment.

HMBS April 2022 Part II: April May but May June?

May 10th, 2022

HMBS payoffs continued in April, as the refinancing wave diminished slightly but refused to ebb. Instead, April payoffs totaled $1.3 billion, just short of March 2022’s record $1.5 billion. Outstanding HMBS rose to a record $58 billion, with strong new issuance and a faster roll-up from rising interest rates.

HECM borrowers continue to refinance in large numbers, assisted by a higher HECM lending limit (now $970,800) and surging home prices (nearly 20% year-over-year, according to some measures). So far, rising interest rates have failed to calm reverse mortgage refinancings. The $1.3 billion in payoffs in April represents a 24% annual payoff rate.

However, April may be the beginning of the end of H2H refis. Given the lag between HECM loan origination and HMBS issuance, the new HECMs backing April’s HMBS pools do not fully reflect the rapid rise in interest rates over the past two months. The numbers for May and June will test the resilience of this refinancing wave, which began with lower interest rates but continued its momentum from the strong home price appreciation and higher FHA lending limits.

While 2021 surpassed all previous records with $13.2 billion HMBS issued, its record may yet fall: over $5.6 billion was issued in the first four months of 2022.
Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $256 million, 20% of the total.

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