2020 Full Year HMBS Issuer League Tables – Consistent AAG Takes the Win

2020 Full Year HMBS Issuer League Tables – Consistent AAG Takes the Win

AAG maintained its #1 HMBS issuer ranking to lead all issuers in 2020 with $2.823 billion of issuance and 26.5% market share. This is the second consecutive year AAG has taken the crown. FAR jumped two notches into second place for the year with $1.869 billion issued and 17.55% market share. Longbridge dropped to third, just behind FAR, with $1.865 billion issued and 17.52% market share, and RMF was fourth with $1.822 billion issued and 17.1% market share. PHH Mortgage stayed in fifth for the year, with $1.352 billion and a 12.7% market share. These five issuers continue to account for 91+% of all HMBS issuance. There were 13 active HMBS issuers in 2020.

2020Q4 saw $3.04 billion of HMBS issued, slightly off third quarter’s $3.16 billion but up significantly from second quarter’s $2.35 billion and first quarter’s $2.09 billion. With HMBS capital markets recovered from the Coronavirus pandemic, HECM origination volume up, and a last-minute surge of LIBOR-based HMBS issuance before conversion to CMT, 2020 HMBS volume crossed $10.6 billion, second only to 2010’s $10.8 billion. While the industry got a 12th hour, 2-month reprieve, time will soon tell how Ginnie Mae’s decision to end LIBOR as an index for new HMBS pools backed by first participations will affect volume.

HMBS December 2020: Santa Grants Every Wish in Record Breaking Month

HMBS issuance totaled $1.2 billion in December 2020, as issuers continued their mad rush to originate and securitize LIBOR-indexed HECM loans before the demise of that index. It turns out December 2020 will not be the last month in which Ginnie Mae allows pooling of new HMBS pools backed by first participations of LIBOR-based HECMs either; the deadline was extended through February. 97 pools were issued in December, of which 79 were LIBOR pools.

A near-record $10.6 billion in HMBS was issued in 2020, easily beating last year’s total of $8.3 billion, 2018’s $9.6 billion, even eclipsing the $10.5 billion in 2017. 2010 remains the all time HMBS volume year with $10.8 billion issued, when Principal Limits were high, full draw fixed rate was all the rage, and no borrower financial assessment safeguards had been established.

December production of original new loan pools was a record $878 million, compared to November’s production of $765 million, October’s $674 million, September’s $693 million, August’s $666 million, July’s $691 million, $593 million in June, $586 million in May, $470 million in April, and $484 million in December 2019. Last month’s new loan pool issuance exceeded the previous record of $834 million, set in April 2013.

December issuance divided into 47 first-participation or original pools, and 50 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, FHA mortgage insurance premiums, etc. Last month’s tail pool issuances totaled $210 million, within the typical $200-$250 million range.

In January 2020 we posed three questions for the year: what happens to LIBOR, what happens to HECM, and will private reverse mortgage production surpass HECM production.

The transition away from LIBOR remains uncertain. Yes, Ginnie Mae will stop securitizing new issue LIBOR based HECMs in March, but what about existing tail issuance? The Constant Maturity Treasury “CMT” index will return as the index for adjustable rate HECM loans, at least until a transition to another index, likely the Secured Overnight Financing Rate “SOFR,” occurs. However, no new first-participation CMT pools have been issued for many years. How will the capital markets respond? Will HUD transition away from LIBOR directly to SOFR, and if so when?

HECM was a bright spot for the industry in 2020. Origination volume soared, borrowers realized increased proceeds from historically low interest rates, the MMI Fund improved dramatically, and HUD, lenders, and NRMLA brought about meaningful borrower protections in the face of the Coronavirus pandemic.
Private production fell off in 2020, due mostly to lower interest rates for HECMs. Why couldn’t private product match the interest rate drops HECM enjoyed? Now, private product must also compete with an even higher Maximum Claim Amount of $822,375, in effect starting January 1. Will private loan volume ever match HECM?

(Editor’s note: The following articles were republished with permission from New View Advisors, which compiled this data from publicly available Ginnie Mae data as well as private sources.)