Sometimes, future trends can be seen in the weeds. In this case it’s the 12 FHA and 1 VA mortgages (out of tens of millions) that were securitized this month in Ginnie Mae pool G2 CA8080, the very first RG pool, issued by PNC Bank, delivered to the GNMII20C program. This pool type was first announced by Ginnie Mae last December 4, and consists entirely of loans that were bought out of pools and cured with partial claims. These are eligible for resecuritization after 6 months without a missed payment. A previous announcement was made by Ginnie Mae last June that prohibited loans in forbearance from being bought out of pools and resecuritized into any existing pool type. This rule was enacted after large banks purchased a massive number of loans in forbearance and resecuritized them immediately, leading to concerns on the part of investors.
Is there anything interesting about these loans?
The loans were all originated in 2011-2013, so they are pretty seasoned. Note rates range from 3.75% - 4.25%. Underwriting characteristics vary considerably, with credit scores ranging from 533 to 829, for example. While original LTV’s are generally high (8/13 greater than 90) home price appreciation over the last 8-10 years likely implies that borrowers have considerable equity.
More of this to come as forbearance programs begin to run out later this year.
So once again we look at the theme of 2021 as a transition year. A lot of the year will be spent peering at the data to tease out emerging trends as we head towards the new normal.
The discernment of new trends requires the use of new data, and new tools. We have recently brought into the Recursion data set FHA Neighborhood Watch data, which was discussed previously in the context of partial claims. These are the suspended mortgage payments for loans in forbearance that are rolled into a second lien, repaid only when the loan is extinguished. This is particularly useful for tracking the financial burden of forbearance by servicer. To accomplish this in a comprehensive manner, FHA releases this data for all endorsed loans. Using this data, we can examine trends in all loans vs those securitized in Ginnie Mae pools. Our data for the FHA Neighborhood Watch extends back only to April 2020, but the last eight months have been an interesting period in mortgage markets.