Ginnie Mae August Issuance Sees $27 Billion, HMBS Sees 13% Decline

The Government National Mortgage Association said it guaranteed $27.8 billion in mortgage backed securities in August.

Lenders issued more than $15.1 billion of Ginnie Mae II single family pools and $7.67 billion Ginnie Mae I single-family pools, with the latest issuance also showing a 13% month-over-month decline for HECM Mortgage Backed Securities (HMBS).

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Ginnie Mae 12 months

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Ginnie Mae HMBS issuance showed a steady increase over the previous months, but posted $844 million in HMBS in August, a $125 million decrease from its July total of $969 million. The issuance has rallied throughout the year, with August’s decrease marking its first decline since May.

Written by Elizabeth Ecker

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  • The number of applications receiving case numbers in August is the lowest it has been in at least four years. We have no public information about case number assignments beyond that. The endorsement total for Savers has never been higher. HECMs for Purchase endorsements are running about 25% of the total for Savers. Once again as a total percentage of total endorsements, the percentage of Savers has never been higher as its new 9.23% mark for August. Savers are a bright spot in our market.

    The total number of applications with case number assignments normally assumed to be those from which endorsements will come was not only down for the fiscal year but also for the calendar year as well. Far too many believe that the endorsements for the calendar year will be higher than the fiscal year. This will no doubt prove to be false for the third year in a row. Those who predicted 100,000 endorsements for the fiscal year and then switched the prediction to the calendar year will no doubt be even more disappointed with calendar year results than those for the fiscal year.

    The only good news is there is some hope that the total endorsements for the fiscal year could be just over 73,000 and for the calendar year just over 70,000. The definite bad news is that it appears the normal inventory of four months of applications with case numbers assigned which starts each fiscal year may be the lowest total in at least four years. BUT that was not unexpected with the loss of the Three, i.e., Financial Freedom, Bank of America, and Wells Fargo.

    As expected, the outlook for next fiscal year is that it will be a significant year of loss in total endorsements but also the year the industry endorsement pie will be permanently and significantly reallocated. Early speculation based on unreliable rules of thumb is that total endorsements for next fiscal year could be less than 61,000 and for the calendar year less than 58,000. Hold on, the ride down will be more interesting this fiscal year than last as everyone watches the market adjust to the loss of the Three.

    Where do you think things are heading? Many of us are looking for some kind of turnaround in the fiscal year ending September 30, 2013. If it does come then, the question is will it be early or late in that year.

      • Mr. Lunde,
         
        During our good years of growth, it is unclear if the loss of B of A or Wells would be noticeable.  This particular fiscal year there is no reason to believe that their loss especially their retail production from their branch referral system will not be noticed.  While we should be in a year of growing endorsement production, the industry has watched the twelve month trailing totals of endorsements for each and every month over the last 29 months go down, except for a four month respite earlier this year.  The existing theoretical fourth month inventory of applications with case numbers assigned from which monthly endorsements are generated has not been lower in the last four fiscal years.  As to loss in endorsement volume there are even more factors coming into play this fiscal year.
         
        There will be no significant spike in case number assignments this September.  In the prior two years we saw some seniors who might not have made the reverse mortgage decision to move forward make that decision over concern that future PLFs and cost factors were expected to be worse.  While that might not constitute more than 4% of the entire production for this fiscal year and 4% of the endorsements for last fiscal year, nonetheless it is a factor.
         
        On the economic and housing front nothing points to better endorsement production for this fiscal year.  The summer season of applications with case number assignments which get into the endorsement count for the fiscal year ending September 30, 2012 is now entirely gone.  While some scream about the benefits of almost 4 million more seniors coming into the market this year alone, what benefit has that annual growth had on the downward trend in endorsement numbers over the last 29 months?  Once again those proponents will be disappointed in the endorsement production for this next fiscal year BUT in a few more years that disappointment should go away and we should all be sharing in their vindication to a greater or lesser degree.
         
        Overall lender marketing should be down this fiscal year.  First lender costs in absorbing all of the great originators they obtained from those lenders who left have been a significant financial drain.  Lenders have reallocated their budgets and adjusted their cash flow outlook to absorb the costs of upfront signing bonuses, minimum salaries, and new employee benefit costs; the question is not if those costs will be recovered from incremental net operating income but WHEN.  Then there is the cyclic rise in media costs due to political races.  House races alone will be hotly contested in many districts; many expect the total media costs of the 30 plus Senate contests to be the most ever.  Republicans are looking for a Presidential candidate just to gain significant traction.  So while originators and companies may be taking on more advertising than ever before, the dollars spent will not go as far and without the marketing of the Big Two, industry marketing as a whole will be negatively impacted.  As an industry we have also lost the location marketing at the branches of the Big Two.
         
        As to counseling, conversion rates have gone down so much that even NCOA the creator and promoter of FIT is rethinking its HECM counseling business model per a statement by Dr. Stucki in a RMD article yesterday.  Counseling is so lost on this issue that the issue did not even come up in the NRMLA webinar on the benefits of the new counseling protocol; instead it was replaced with an overemphasis on how the new protocol is helping seniors obtain benefits through BCU.
         
        The industry is also going through a structural transition where call centers will be absorbing more and more of the traditional HECM customer base with little to no real growth in overall endorsement production in that base.  In fact call centers are now more than ever before in competition with their own boots on the ground originators.  To a significant degree boots on the ground are emphasizing a new direction in increasing their professional advisor referral base.  No doubt this will be a long-term permanent trend which you personally in part have addressed.  My approach just makes the new emphasis on call centers sound more cannibalistic which in fact right now they are.
         
        With nothing to show any real potential industry wide endorsement growth in the next fiscal year and losing the two companies accounting for over 40% of retail activity with their huge branch operations footprints, the industry will noticeably lose some portion of the endorsements which came from their HECM retail operations until either or both return to our marketplace (yes, even if a significant banking operation comes in to replace either one of them).  You have described this as a permanent loss and unless they return, I fully concur.

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