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Discovering Third-Party Mortgage Originators

6/28/2022

 
Usually, when we talk about financial institutions in our posts, we focus on sellers and/or servicers as we have a clear view from the Agency disclosures. An interesting distinction in this regard is to break down originations between those sourced through a retail channel within the lending institutions and those purchased from other lenders, known as third-party originations (TPOs). We are often asked the question in the case of TPO lending, where only sponsors of the mortgages are reported, who are the originators? This information is not reported in the agency loan-level disclosure. We can supplement this information by examining originators in the HMDA data by observing the fact a TPO (correspondent or broker) loan is often reported twice, one record reported by the originator and another reported by the sponsor. At Recursion, we conducted an exercise by matching the pairs together, and we were able to identify the counterparty pairs for about 50% of the mortgages marked as “purchased”, and also made this revealing data point to our HMDA Analyzer users.
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According to the 2021 HMDA preliminary release, about 2.65 million loans were purchased from other lenders that year, about 18% of all originations. Roughly half of these purchases were made by 10 institutions:
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Agency MBS Issuance Trends in an Environment of Rising Mortgage Rates and House Prices

5/10/2022

 
With the 30-year mortgage rate surging to a 13-year high near 5 ¼% and the FHFA purchase-only house price index at a record-high 19.42% in February (edging out the prior record of 19.39% in July 2021), we are in an unprecedented environment in the mortgage market. As such, it makes sense to update our analysis of the trend in issuance updated through April. Of particular interest in this regard are the FHA and VA programs.
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Let’s start by looking at FHA. By loan count, there were 107,500 FHA loans issued in GNM pools in April, with a decline of over 1/3 from the same month a year earlier. One special interest is the evolution of the share of issuance by loan purpose:
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Perspectives on Expiring Forbearance Programs on GNM Loan Performance

3/22/2022

 
With the expiration of forbearance programs underway, there is an interesting question about how loans exiting these programs will perform once they are resecuritized. For Ginnie Mae programs, these are either loans that exit forbearance with a partial claim or receive a permanent mod under the various waterfall options in the FHA or VA programs. In our previous blogs[1], we have noted MOD and RG loans are becoming a significant portion of loans delivered to newly issued Ginnie Mae pools.
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Agency-based Metrics for Assessing the Resolution of Mortgage Forbearance and Delinquencies (Part I– Government Programs)

2/22/2022

 
In a fine recent paper, the Federal Reserve Bank of Philadelphia “highlights the immediacy of the challenges facing mortgage servicers and policymakers” that arise from the resolution of mortgage forbearance and delinquencies[1]. As of the time of writing, the Philly Fed stated that “some 2.73 million mortgages are either in forbearance or past due; about 0.78 million of those are in Coronavirus Aid, Relief, and Economic Security (CARES) Act forbearance plans”. In addition, “about 47 percent of loans in forbearance will expire in the first quarter of 2022; another 42 percent will expire in the second quarter”. They go on to discuss recent trends and provide data on income and demographics of these borrowers.
 
The point of this brief article is to look at secondary market indicators to shed additional light on these issues. The note is broken into two parts, the first looks at Government programs, notably FHA and VA, while the second looks at the GSEs.

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Phoning Home: The New ET Pools have Landed!

1/11/2022

 
On June 25, 2021, Ginnie Mae announced the creation of a new pool type C-ET that consists of modified loans with original terms greater than 361 months and less than or equal to 480 months[1]. The Custom pool design implies that each pool is created by a single issuer. Other custom pools are limited to 360-month maturities, so this structure is designed to enhance liquidity for these borrowers. 7 such pools were issued in December 2021, and 1 in January 2022 so far. The 8 pools have only 13 loans, from 3 issuers. 8 out the 13 loans are Rural loans, 5 are VA.
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​Once again, Ginnie Mae has provided the market with new investment opportunities, and analysts with the opportunity to learn about how markets behave under long-term timeframes.

[1] https://www.ginniemae.gov/newsroom/Pages/PressReleaseDispPage.aspx?ParamID=209

Why are Ginnie Prepays Widening Relative to Conventionals?

11/19/2021

 
​Over the past six months, prepayment speeds of Ginnie Mae securities have notably widened against those of the GSEs.
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Prepping for the End of Forbearance

11/3/2021

 
As we approach year-end and the beginning of the process of phasing out forbearance programs, the natural question market participants are asking is which indicators should they be watching to gain a sense of the mortgage landscape in 2022. Along these lines, there is a significant difference between the Ginnie Mae programs and the GSE’s. In particular, for conforming loans, it is the Agencies themselves that buy nonperforming loans out of pools, while for FHA and VA, this function is performed by servicers. As the timeframe for buyouts on the part of the GSE’s was extended to 24 months earlier this year, we won’t see much activity prior to April 2022 on this front[1]. So in this post, we focus on the Ginnie Mae programs.

As we have written previously, it is challenging to follow the path of a loan once it has been purchased out of a pool. At the aggregate level, we can view the activity of individual lenders using the FHA Neighborhood Watch data[2]. In terms of the process, a nonperforming loan is bought out of a pool, and one of three actions can be taken. First, the borrower can be taken into foreclosure. Second, the borrower can become current and roll the unpaid balance into a second lien, in a process known as a partial claim. Third, the borrower can accept a loan modification.

In terms of the scale of buyouts, after an early spurt of activity in 2020 on the part of some parties, notably banks, the involuntary prepayment rate, measured by CDR(constant default rate), has settled down in recent months. FHA nonbank servicers have been more active in this space than other categories over the past year.  As forbearance plans begin to expire towards the end of the year, these numbers may start to rise.
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Impact of COVID on Ginnie Mae Modified Loans

8/23/2021

 
One of the many recurring themes of these posts is that the shock of the Covid-19 Pandemic and subsequent policy response has resulted in structural changes in behavior that cause loan performance metrics to shift compared to the pre-crisis world. An interesting example of this can be found in the performance of modified loans in Ginnie Mae programs.

Modified loans in these programs are those that have been purchased out of pools by servicers that are past due that subsequently have features such as rate and term adjusted in order to bring households back to a current status. These are then often resecuritized into a new GNM pool.
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  • Securitization of modified loan volumes more than doubled after the pandemic
The Covid shock of course has resulted in a surge in delinquencies and triggered large volumes of buyouts and modifications. Below find a plot of the share of modified loans of total new issuance for FHA and VA programs since January 2020:
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