HMBS February 2024 Part II: Best Supporting Role Goes To Rate Dip Amid HMBS Issuance Floppenheimer

March 11th, 2024

Total HMBS payoff speeds in February were a tad slower than those in January; Mandatory Purchases and natural payoffs were approximately 9.2% and 6.5% per annum, respectively. February payoffs totaled about $792 million compared to January’s $814 million. Outstanding HMBS decreased slightly to $58.7 billion.

As mentioned in previous blogs, Ginnie Mae took over RMF’s HMBS portfolio in December 2022. “Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 4,022 former RMF pools. About $309 million of Issuer 42’s portfolio paid off in February, but Issuer 42 still accounts for $17.7 billion, or about 30% of all outstanding HMBS. Issuer 42 has not issued any tail pools; we estimate Issuer 42 now has well over $1 billion uncertificated position, that is, the excess of their portfolio’s HECM asset balance over the balance of their HMBS liability.

When a HECM loan balance reaches 98% of its MCA, the HMBS issuer is required to buy the loans out of the HMBS pool, and then may assign the loan to HUD if the loan is not in default. This is effectively a prepayment event for the HMBS investor, even though the underlying HECM loan remains outstanding. According to our friends at Recursion, 59% of HMBS payoffs last month were due to Mandatory Purchase, totaling about $463 million, a significant decrease from last month’s $514 million, dropping below the average for calendar year 2023 ($504 million per month) but remaining above 2022’s $315 million per month.

Including the Mandatory Purchases, HMBS paid off at a 15.7% annual rate in February, and 17.2% over the last 12 months. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly over the past 12 months. Natural payoffs (those other than Mandatory Purchases) for the 12 month period ending February 30th were 7.4% per annum, compared to 12.3% for the prior 12 month period.

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

HECM Endorsement Analytics – February 2024

March 5th, 2024

Endorsement count continues to trend lower in 2024. In February only 1,900 loans were endorsed, notably lower than the 2,153 loans in January. February marks the first time monthly endorsement count dropped below 2,000 since March 2023. Our full report can be found here: NV Endorsement 2024_02.

HUD’s December Endorsement Snapshot Report was just released on its website. This report now lags the Endorsement Summary report by two months. Refinance accounts for barely 5.4% of all HECM endorsements, a level last seen in late 2018 and early 2019, before the precipitous interest rate drop brought about by the pandemic.

HMBS February 2024: Valentine’s Day Massacre

March 1st, 2024

The HMBS new issue market continues its dismal volume in February. HECM Mortgage-Backed Securities (“HMBS”) issuance totaled $429 million in February, $16 million lower than January’s $445 million. 80 pools were issued in February and 79 in January. Except for the early days of the Ginnie Mae HMBS program (2009 and prior), February’s $429 million issuance was the second lowest ever. One would have to look to 2014 to find lower monthly volume.

FAR was the top issuer in February with $143 million – $12 million lower than January’s $155 million. Issuance from Longbridge decreased by $10 million to $82.6 million. PHH and Mutual of Omaha issued $83 million and $74 million respectively. Ginnie Mae/RMF (aka “Issuer 42”) again issued no HMBS pools.

HMBS issuance set a record in 2022, with nearly $14 billion issued. Total issuance for 2023 was approximately $6.5 billion. 2024 is off to a bad start with total issuance through February totaling $874 million – $156 million lower than this time last year and $1.86 billion lower than this time in 2022.

February’s original (first participation) production of $264 million was $16 million lower than January’s $280 million. February’s original new loan pool production was much less than that of February 2023, when approximately $336 million in original new HMBS pools were issued.

The 80 pools issued in February consisted of 21 first-participation or original pools and 59 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. Last month’s tail pool issuances totaled $165 million, below the typical range.

Notable in the February HMBS issuance data are 26 pools with aggregate pool size less than $1 million. Issuers are taking advantage of Ginnie Mae’s provision to issue pools as small as $250,000. This represents $14.3 million of UPB that may not otherwise have been issued in February. Ginnie Mae issued APM 23-11 in September which allows participations from the same loan to be pooled more than once in the same month. The aggregate of participations pooled in February for which more than one participation from the same loan was pooled is $54.9 million of which $2.0 million were first participations.

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 – January 2024

February 12th, 2024

The New View Advisors and Recursion January 2024 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 01_2024. The indices are derived from underlying HECM data in HMBS made public by Ginnie Mae, as well as private sources. This 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 January 2024 Part II: Shadow Sees Groundhog

February 9th, 2024

The reverse mortgage industry’s loan production is a shadow of its former self, with lower origination and loan payoff rates that change little from month to month. In the latest scene from Groundhog Day II, HMBS payoff speeds in January were strikingly similar to those in December; Mandatory Purchases and natural payoffs were approximately 10.1% and 5.9% per annum, respectively. January payoffs totaled about $814 million compared to December’s $819 million. Outstanding HMBS decreased slightly to $58.8 billion.

As mentioned in previous blogs, Ginnie Mae took over RMF’s HMBS portfolio last January. “Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 4,027 former RMF pools. About $315 million of Issuer 42’s portfolio paid off in January, but Issuer 42 still accounts for $17.9 billion, or 30% of all outstanding HMBS. Issuer 42 has not issued any tail pools; we estimate Issuer 42 now has well over $1 billion uncertificated position, that is, the excess of their portfolio’s HECM asset balance over the balance of their HMBS liability.

When a HECM loan balance reaches 98% of its MCA, the HMBS issuer is required to buy the loans out of the HMBS pool, and then may assign the loan to HUD if the loan is not in default. This is effectively a prepayment event for the HMBS investor, even though the underlying HECM loan remains outstanding. According to our friends at Recursion, 63% of HMBS payoffs last month were due to Mandatory Purchase, the highest percentage in nearly five years, totaling about $514 million, an increase from last month’s $501 million, remaining above the average for calendar years 2023 ($504 million per month) and 2022 ($315 million per month).

Including the Mandatory Purchases, HMBS paid off at a 16.0% annual rate in January, and 17.1% over the last 12 months. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly over the past 12 months. Natural payoffs (those other than Mandatory Purchases) for the 12 month period ending January 30th were 7.4% per annum, compared to 13.2% for the prior 12 month period.

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

HECM Endorsement Analytics – January 2024

February 6th, 2024

There were 2,153 endorsements in January 2024, slightly lower than the 2,190 loans from December. The top three lenders started the year with 497, 591, and 258 endorsements, respectively, accounting for 62.5% of all endorsements. Our full report can be found here: NV Endorsement 2024_01.

HUD’s November Endorsement Snapshot Report was just released on its website. This report release date now lags the Endorsement Summary report by two months.  H2H refinance volume has dropped to less than 7.5%.  H4P is almost 6%.

HMBS January 2024: Unhappy New Year

February 1st, 2024

The HMBS new issue market was slightly lower in January compared to December.  HECM Mortgage-Backed Securities (“HMBS”) issuance totaled $445 million in January, $12 million lower than December’s $457 million. 79 pools were issued in each of January and December.  Except for the early days of Ginnie Mae’s HMBS program (2009 and prior), January’s $445 million issuance was the fourth lowest monthly tally ever.  Aside from March 2023’s $442 million, one would have to look back to 2014 to find lower monthly volume.

FAR was the top issuer in January with $155 million – close to December’s $157 million.  Issuance from Longbridge increased by ~$3 million to $93 million.  PHH and Mutual of Omaha issued $83 million and $75 million respectively.  Ginnie Mae/RMF (aka “Issuer 42”) again issued no HMBS pools.

Total HMBS issuance for 2023 was $6.5 billion, less than half of 2022’s record $14 billion issued.  2024 is off to a slow start with January’s issuance being $78 million lower than January 2023’s $523 million.

January’s original (first participation) production of $280 million was in line with December’s $282 million.  January’s original new loan pool production was much less than that of January 2023, when approximately $347 million in original new HMBS pools were issued.

The 79 pools issued in January consisted of 21 first-participation or original pools and 58 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. Last month’s tail pool issuances totaled $165 million, below the typical range.

Notable in the January HMBS issuance data are 21 pools with aggregate pool size less than $1 million. Issuers are taking advantage of Ginnie Mae’s provision to issue pools as small as $250,000. This represents $12.3 million of UPB that may not otherwise have been issued in January. Ginnie Mae issued APM 23-11 in September which allows participations from the same loan to be pooled more than once in the same month. The aggregate of participations pooled in January for which more than one participation from the same loan was pooled is $57.2 million.

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 – December 2023

January 11th, 2024

The New View Advisors and Recursion December 2023 expanded HECM reverse mortgage prepayment indices can be found here: New View Advisors Recursion Cohort Speeds 12_2023. The indices are derived from underlying HECM data in HMBS made public by Ginnie Mae, as well as private sources. This 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 December 2023 Part II: Will Boring New Year’s Eve Party Bring Sobriety to RM Industry?

January 10th, 2024

HMBS payoff speeds in December were basically unchanged from November; Mandatory Purchases and natural payoffs were approximately 9.9% and 6.2% per annum, respectively. December payoffs totaled about $819 million compared to November’s $825 million. Outstanding HMBS decreased slightly and remains just under $59 billion.

As mentioned in previous blogs, Ginnie Mae took over RMF’s HMBS portfolio last December. “Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 4,030 former RMF pools. About $300 million of Issuer 42’s portfolio paid off in December, but Issuer 42 still accounts for $18.1 billion, or about 31% of all outstanding HMBS. Issuer 42 has not issued any tail pools; we estimate Issuer 42 now has well over $1 billion uncertificated position, that is, the excess of their portfolio’s HECM asset balance over the balance of their HMBS liability.

When a HECM loan balance reaches 98% of its MCA, the HMBS issuer is required to buy the loans out of the HMBS pool, and then may assign the loan to HUD if the loan is not in default. This is effectively a prepayment event for the HMBS investor, even though the underlying HECM loan remains outstanding. According to our friends at Recursion, 61% of HMBS payoffs last month were due to Mandatory Purchase, totaling about $502 million, a decrease from last month’s $512 million, remaining above the average for the prior 11 months of 2023 ($497 million per month) and all of 2022 ($315 million per month).

Including the Mandatory Purchases, HMBS paid off at a 16.1% annual rate in December, and 17.0% over the last 12 months. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly over the past 12 months. Natural payoffs (those other than Mandatory Purchases) for the 12 month period ending December 30th were 7.4% per annum, compared to 14.2% for the prior 12 month period.

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

HECM Endorsement Analytics – December 2023

January 8th, 2024

New View Advisors’ HECM Endorsement Analytics Report for December 2023 can be found here:  NV Endorsement 2023_12