Home Equity Conversion Mortgage (HECM) Backed Securities (HMBS) Update Data as of April 2018
HMBS Current State Snapshot HMBS Portfolio Fiscal year 1 (FY)-to-date growth in the outstanding • 16 Active HMBS Issuers • portfolio is at 2.5%, up from 0.5% last year • $56.5B in UPB • This is largely driven by record issuance in the past • 340,051 Loans three months, matched by record liquidations • 11.4M Participations • Servicing is concentrated in a handful of Issuers, with the Top-3 comprising 52% of the program HMBS Issuance • • Adjustable-rate mortgage (ARM) issuance has made up FY2017: • 90% of FY2018 HMBS issuance – with the majority $9.6B issued in total $796M/Month being annual adjusting LIBOR pools • • FY2018 YTD: While HMBS volume is traditionally driven by • $7.4B issued in total securitization of new loans, recent highs have been • $1.1B/Month boosted by first securitizations of highly seasoned loans HREMIC Issuance • • FY2017: HREMIC issuance in FY2018 Q2 was the highest • $9.5B issued in total quarter in 3 years, but not likely to keep pace with $791M/Month FY2018 YTD production down 9% from last year • • FY2018 YTD: At this time last year, HREMIC issuance was 110% of • $5.4B issued in total that of HMBS, with HREMICs outpacing regular HMBS • – currently this ratio has slowed to 72% $771M/Month 1 1 Fiscal year is defined as October through September
HMBS Issuance Is Driven By New Loans While HMBS production is primarily driven by new loans, the most recent issuance highs were driven by new securitizations of highly seasoned HECMs. OPB ($M) Participations $3,500 1,000,000 900,000 $3,000 800,000 $2,500 700,000 600,000 $2,000 500,000 $1,500 400,000 300,000 $1,000 200,000 $500 100,000 $0 0 First Draws Tail Draws Participations 2
HMBS Issuance Is Heavily ARM Focused HMBS production has steadily increased over the last fiscal year, driven primarily by LIBOR ARM pools. Treasury ARM issuance driven by highly seasoned loans OPB ($M) $3,500 $3,000 $2,500 $2,000 Annual ARM $1,500 87% 2018 Q2 LIBOR ARM $1,000 Breakout $500 Monthly $0 ARM 13% LIBOR ARM Fixed Treasury ARM 3
HMBS Issuance Is Dominated By Non-Banks Nearly all HMBS is issued by non-bank institutions, comprising 99% of FY2018 issuance-to-date. FY2018 YTD Issuance April 2010 OPB Percent Issuer Issuance Issuer Name Number Concentration 4277 REVERSE MORTGAGE FUNDING, LLC $2,644,553,546 35.6% 4250 AMERICAN ADVISORS GROUP, INC. $1,334,173,939 18.0% Depository: 88% 4132 FINANCE OF AMERICA REVERSE LLC $1,092,477,406 14.7% 4153 OCWEN LOAN SERVICING, LLC $640,306,530 8.6% Non-Depository: 12% 4174 LIVE WELL FINANCIAL, INC. $553,076,258 7.5% 4394 LONGBRIDGE FINANCIAL, LLC $513,181,835 6.9% 4157 NATIONSTAR MORTGAGE LLC $257,679,267 3.5% 4015 REVERSE MORTGAGE SOLUTIONS, INC. $176,913,057 2.4% April 2018 4021 SUNWEST MORTGAGE COMPANY, INC. $52,798,015 0.7% Issuance 4211 PLAZA HOME MORTGAGE, INC. $50,047,335 0.7% Concentration 4229 CHERRY CREEK MORTGAGE CO., INC. $37,907,825 0.5% 4305 THE MONEY SOURCE, INC. $21,064,415 0.3% 4311 TRADITIONAL MORTGAGE ACCEPTANCE $23,873,285 0.3% Depository: <1% 4036 BANK OF AMERICA $10,835,268 0.1% Non-Depository: 99% 4325 THE MONEY HOUSE, INC. $11,246,706 0.2% 4148 CIT BANK, N.A. $2,272,031 0.0% Total $7,422,406,718 100.0% 4
HMBS Servicing Is Concentrated In A Few Issuers 98% of all HMBS outstanding is serviced by non-banks, with the top three servicing over half of the HMBS market. FY2018 YTD Outstanding Portfolio April 2010 UPB Percent Issuer Portfolio Issuer Name Number Concentration 4157 NATIONSTAR MORTGAGE LLC $12,015,861,747 21.3% 4132 FINANCE OF AMERICA REVERSE LLC $9,359,824,499 16.6% Depository: 80% 4015 REVERSE MORTGAGE SOLUTIONS, INC. $8,095,933,528 14.3% 4250 AMERICAN ADVISORS GROUP, INC. $7,839,868,114 13.9% Non-Depository: 20% 4277 REVERSE MORTGAGE FUNDING, LLC $7,689,743,092 13.6% 4153 OCWEN LOAN SERVICING,LLC $4,479,113,277 7.9% 4174 LIVE WELL FINANCIAL, INC. $3,967,423,235 7.0% 4394 LONGBRIDGE FINANCIAL, LLC $836,742,101 1.5% April 2018 4036 BANK OF AMERICA $617,840,750 1.1% Portfolio 4148 CIT BANK, N.A. $368,624,238 0.7% Concentration 4305 THE MONEY SOURCE, INC. $348,417,031 0.6% 4211 PLAZA HOME MORTGAGE, INC. $308,395,073 0.5% 4021 SUNWEST MORTGAGE COMPANY, INC. $306,186,154 0.5% Depository: 2% 4311 TRADITIONAL MORTGAGE ACCEPTANCE $138,540,497 0.2% 4229 CHERRY CREEK MORTGAGE CO., INC. $100,229,243 0.2% Non-Depository: 98% 4325 THE MONEY HOUSE, INC. $17,392,185 0.0% Total $56,490,134,765 100.0% 5
HMBS Program Growth Is Decelerating… Net HMBS portfolio growth has slowed significantly, but has seen a recent uptick attributed to the securitization of pools backed by highly seasoned HECMs. UPB ($M) $60,000 2.5% 0.5% 5% 7% 10% $50,000 21% 28% $40,000 59% $30,000 195% $20,000 482% 1 $10,000 $0 Portfolio UPB Net Growth 6 1 Year-over-Year Portfolio Growth
…While Mandatory Repurchases Are Accelerating Liquidation activity has increased dramatically in recent years, driven primarily by mandatory purchase events (repurchase once HECM UPB reaches 98% of maximum claim amount (MCA)). UPB ($M) $6,000 55% $5,000 53% $4,000 45% 53% $3,000 40% $2,000 $1,000 16% 17% 1 $0 Mandatory Purchase Events Voluntary Full Payments Partial Payments Other Payments 7 1 Liquidation Share of Mandatory Purchase Events
Mandatory Repurchases Are Driving Liquidity Needs The estimated liquidity peak for mandatory repurchases is $7B in FY2018. UPB ($M) MCA Repurchase Volume $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 8
New Loan HMBS Issuance Dec 2017 - April 2018 $800 $700 $600 $500 Millions $400 $300 $200 $100 $- New Loan HMBS Pool Issuance December 2017 January 2018 February 2018 March 2018 April 2018 Source: Ginnie Mae /New View Advisors
12M LIBOR HECM Margin 2.90% 2.80% 2.70% Average Margin 2.60% 2.50% 2.40% 2.30% 2.20% 2.10% 2.00% September October November December January February March 2018 April 2018 2017 2017 2017 2017 2018 2018 12M LIBOR HECM Margin 2.77% 2.79% 2.78% 2.69% 2.54% 2.28% 2.17% 2.08% Source: Ginnie Mae / Recursion / New View Advisors
Fixed Rate HECM vs. Forward Mortgage 5.00% 4.50% Interest Rate 4.00% 3.50% 3.00% September October November December January February March 2018 April 2018 2017 2017 2017 2017 2018 2018 Fixed Rate HECM 4.97% 4.97% 4.94% 4.87% 4.81% 4.76% 4.71% 4.64% 15 Year Forward Fixed 3.13% 3.21% 3.31% 3.38% 3.62% 3.84% 3.90% 4.02% 30 Year Forward Fixed 3.83% 3.94% 3.90% 3.99% 4.15% 4.40% 4.45% 4.58% Prime Rate 4.25% 4.25% 4.25% 4.50% 4.50% 4.50% 4.75% 4.75% Source: Ginnie Mae / Recursion / New View Advisors
HECM Trends: As Rates have Risen, HECM Margins have Decreased 10 -Year Swap and Margin Trends 3.50 3.00 10 YR SWAP 2.50 2.00 NWAM 1.50 1.00 0.50 0.00 10/1/2017 11/1/2017 12/1/2017 1/1/2018 2/1/2018 3/1/2018 4/1/2018 12
HECM Trends Decrease in HECM Margins: An attempt to keep the Expected Rate more stable? - 10 Yr swap has increased 80bps since October 2017 - The average Expected Rate has only increased by about 20-40bps EXPECTED RATE 6.00 5.50 5.00 EXPECTED RATE 4.50 4.00 3.50 10/1/2017 11/1/2017 12/1/2017 1/1/2018 2/1/2018 3/1/2018 4/1/2018 13 13
HECM and Rates Tearsheet - Expected Rates currently 4.75%-5.1% on 2017 Production. - If current trends continue, we expect to see margins decline as 10-yr swaps increase. - Market believes that we will stay in a rising interest rate environment for some time. - Rising Rates is Positive for the Convexity profile of already originated HECMs….but not great for Originators - Should rates continue to rise, we believe HECM refi activity to be muted. 14
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