HECM Endorsement Analytics – April 2019

May 1st, 2019

New View Advisors’ April 2019 HECM endorsement analytics is posted: NVA Endorsement Report 2019_04. Each month, HUD releases HECM endorsement data to the public, links to which are provided in the report’s summary. New View Advisors’ reports compile HUD’s data into user-friendly and more informative formatting. Customized reports for client-specific needs are also available upon request.

Please contact us if you’re interested in subscribing, or learning more about our expanded endorsement data services.

HMBS March 2019 Part II: March Backwards – Big Payoffs Drive Down HMBS Float

April 9th, 2019

HMBS float fell again in March as a big payoff total continued to outweigh issuance. With over $950 million in payoffs and a continued drought of new issuance, total outstanding HMBS ended the month just under $54.6 billion, down about $200 million from February. HMBS float had been range-bound between just under $55 billion to $57 billion for over two years. The current float is the lowest since August 2016.

Total HMBS float will likely fall further given current trends. As we noted last week, HMBS issuance was only about $557 million in March, with one highly seasoned new issue.

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 March came close, billion-dollar-plus payoff months will be the exception rather than the rule. Many 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 $616 million, or about 63%, of the payoffs last month. This 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 these results from publicly available Ginnie Mae data as well as private sources.

2019Q1 HMBS Issuer League Tables – Look Who’s Back

April 8th, 2019

After a full year away from #1, AAG recaptured the lead HMBS issuer slot for the first quarter of 2019, with $391 million of issuance for a 23.5% market share.  RMF was second, with $323.5 million issued and 19.5% market share, and FAR remained in third with $244 million issued and 14.7% market share.  Ocwen Loan Servicing and Nationstar round out the top five issuers.  Ocwen issued $210.6 million for a 12.7% market share, and Nationstar was fifth with $142.7 million and 8.6% market share.  These five issuers accounted for approximately 79% of all issuance, down from 2018’s record 92%. There were 15 active HMBS issuers during the quarter, including first-time issuer Synergy One Lending, now owned by Mutual of Omaha.

2019Q1 saw only $1.67 billion of HMBS issued, a 44% decline from one year ago, and an almost five-year quarterly low.  For comparison, total HMBS issuance volume in the first quarter of 2018 equaled $2.97 billion.  As previously noted, unless highly seasoned pool issuance makes a meaningful and lasting return, expect lower HMBS issuance volume going forward.

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

New View Advisors HECM Endorsement Analytics

April 8th, 2019

New View Advisors is launching its monthly HECM endorsement report as part of our growing suite of products in the reverse mortgage industry.  Each month, HUD releases HECM endorsement data to the public, links to which we have provided in the report’s summary.  New View Advisors’ reports compile HUD’s data into user-friendly and more informative formatting.  Customized reports for client-specific needs are also available upon request.

The March 2019 report can be found here: New View Advisors Endorsement Report March 2019

Please contact us if you’re interested in subscribing, or learning more about our expanded endorsement data services.

March 2019 HMBS Issuance: Groundhog Day in March

April 3rd, 2019

HMBS issuance held steady in March 2019 at just under $558 million. March issuance was consistent with the sharply lower issuance of recent months, despite one highly seasoned pool that bumped up volume. 88 pools were issued in March, including about $277 million of new first participation pools. HMBS float shrinkage will continue as March’s payoffs are almost certain to outweigh new issuance and interest roll-up.

HMBS issuers brought just under $1.7 billion to market in the first quarter of 2019. This is the lowest quarter of HMBS issuance since the third quarter of 2014. Reverse mortgage lenders face a new era of reduced volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of Fiscal Year 2018. For the entire year of 2018, HMBS issuance totaled about $9.6 billion, compared to $10.5 billion in 2017. The HMBS market will be hard pressed to equal last year’s totals, which included some HMBS issuance backed by new HECM loans originated at higher PLFs.

Production of original new loan pools was consistent with the $274 million issued in February, $304 million in January and $277 million in December, but well below the $360 million in September 2018. Last month’s tail pool issuances totaled $220 million, within the range of recent tail issuance. For the past few months, the new issuance market has settled into Groundhog Day mode, with very similar volume statistics other than the occasional seasoned first participation issue. For comparison, HMBS issuers sold 115 pools totaling $626 million in March 2018.

March 2019 issuance divided into 33 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.

February 2019 Part II: HMBS Still Can’t Drive … 55 (Billion)

March 12th, 2019

HMBS float fell as predicted to less than $55 billion in February as payoffs continue to outweigh falling issuance. Once again with just over $900 million in payoffs, and a continued drought of new issuance, total outstanding HMBS ended the month at $54.8 billion, down over $225 million from January. HMBS float has been range-bound between just under $55 billion to $57 billion for over two years. Total HMBS float will likely fall further given current trends.

As noted last week, HMBS issuance was only about $490 million in January, with no highly seasoned new issuance.

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. Although many loans continue to reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”), Peak Buyout appears to have ended.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $638 million, or about 71%, of the payoffs last month. This 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.

February 2019: Groundhog Day for HMBS Market – Long Winter Ahead?

March 1st, 2019

HMBS issuance fell in February 2019 to just under $491 million, the lowest issuance level in nearly 5 years. February issuance was consistent with the sharply lower issuance trend of recent months, made even weaker due to February’s low day count and lack of any highly seasoned pools. 82 pools were issued in February, including nearly $274 million of new, first participation pools. HMBS float shrinkage will continue as February’s payoffs are almost certain to outweigh new issuance and interest roll-up.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of Fiscal Year 2018. For the entire year of 2018, HMBS issuance totaled about $9.6 billion, compared to $10.5 billion in 2017. The HMBS market will be hard pressed to equal last year’s totals, which included some HMBS issuance backed by new HECM loans originated at higher PLFs.

Production of original new loan pools was about $274 million, down from $304 million in January and $277 million in December, and well below the $360 million issued in September 2018. Last month’s tail pool issuances totaled $217 million, within the range of recent tail issuance. By comparison, HMBS issuers sold 129 pools totaling $1.47 billion in February 2018.

February 2019 issuance divided into 35 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 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.

SASCO 2006-RM1: Proprietary Reverse Mortgage Goes Four-for-Four as Winning Streak Continues

February 28th, 2019

Structured Asset Securities Corporation Reverse Mortgage Loan Trust Series 2006-RM1 (“SASCO 2006-RM1”) recently became the fourth SASCO securitization trust of proprietary reverse mortgages to pay off completely. The remaining bondholders received their final payments on February 25, 2019; all bondholders received their principal and interest payments in full. The trust was created in August 2006 and was the fourth reverse mortgage securitization in U.S. history. The first two securitizations, SASCO 1999-RM1 and SASCO 2002-RM1, both paid off successfully in 2014. SASCO 2005-RM1 paid off in 2016. SASCO 2007-RM1 is the sole remaining transaction from Lehman Brothers’ SASCO “RM” securitization program.

SASCO 2006-RM1 issued 4 bond classes: Class A1, A-IO, M1, and M2. These bonds, totaling $598 million, were secured by 1,558 adjustable rate Financial Freedom “Cash Account” loans.

When SASCO 2005-RM1 paid off in 2016, we noted “Beginning in 2014, reverse mortgage lenders have revived proprietary reverse mortgages after a six year hiatus with very little new production.” Since then, production has ramped up as multiple lenders now originate proprietary reverse mortgages. New securitization programs have followed, supplied by both new and seasoned proprietary reverse mortgages.

Reverse mortgage lenders are fast approaching the record of pre-crisis proprietary loan origination. Production peaked in 2007 at about $100 million per month, but ground to a halt with the mortgage crisis, crashing home prices, and the virtual destruction of the non-agency securitization market.

The SASCO-RM securitization history has helped this revival by reinforcing the relative value story of proprietary reverse mortgages. If properly structured, proprietary reverse mortgage securities provide substantial credit protection with (like their HECM cousins) very stable prepayments. The credit story derives mainly from the low original Loan-to-Value (“LTV”) ratios of these loans, combined with conservative rating agency criteria. As was the case with all of the SASCO proprietary reverse securitizations, the rating agencies (in this case, Moody’s, S&P and Fitch) were right to insist that the triple-AAA Class A bonds be protected against a 30%+ decline in home prices — which was exactly the stress the trust successfully endured during the financial crisis. The transaction’s successful payoff continues a winning streak of nearly 20 years, including the darkest years of the mortgage crisis, in which no proprietary reverse mortgage bond has suffered a principal loss or write-down.

As was the case with previous SASCO RM deals, the stability of the prepayments can be seen in many ways. For example, the paydown of the bonds validated the weighted average paydown speed predicted when the deal closed in 2006. For Class A1, the predicted weighted average life of 4.74 years at 100% of the Base Case Prepayment Curve (“100% PPC”) was spot on with the actual result. The Class A-IO paid all of its cash flow exactly to its schedule, tallying its projected weighted average life of 5.62 years. Class M1 was predicted to have a 3.71 year weighted average life; it clocked in at 3.79 years. Class M2 was predicted to have a 2.50 year weighted average life; it extended slightly to 3.66 years.

January 2019 Part II: HMBS Can’t Drive … 55 Billion

February 11th, 2019

HMBS float fell again in January as big payoffs continued to outweigh falling issuance. With just over $900 million in payoffs, total outstanding HMBS ended the month at $55.031 billion, down about $100 million from December. While HMBS float has been range-bound between $55 billion and $57 billion for over two years, it will likely fall below $55 billion by the end of February.

As noted last week, HMBS issuance was only about $614 million in January, including one highly seasoned new issue.

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. Although many loans continue to reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”), Peak Buyout appears to have ended.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $637 million, or about 69%, of the payoffs last month. This continues a generally 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.

January 2019: HMBS Market Imitates Super Bowl with Low Scoring Month

February 5th, 2019

HMBS issuance fell in January 2019 to just under $614 million, despite help from one highly seasoned pool of original collateral. January issuance was very similar to recent months’ weak numbers, which were among the lowest issuance levels in over four years. 97 pools were issued in January, including just over $300 million of new first participation pools. HMBS float shrinkage will continue as January’s prepayments are almost certain to outweigh new issuance and interest roll-up.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of Fiscal Year 2018. For the entire year of 2018, HMBS issuance totaled about $9.6 billion, compared to $10.5 billion in 2017. The HMBS market will be hard pressed to equal last year’s totals, which also included HMBS issuance backed by new HECM loans originated at higher PLFs.

Production of original new loan pools was about $304 million, up from last month’s $277 million, and November’s $298 million, but below October’s $325 million and $360 million in September. Last month’s tail pool issuances totaled $259 million, within the range of recent tail issuance. By comparison, HMBS issuers sold 111 pools totaling $869 million in January 2018.

January 2019 issuance divided into 36 original pools and 61 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.