Ocwen, Live Well, RMF Lead Way as Secondary Market Strengthens

Prepayment speeds for Home Equity Conversion Mortgage-backed securities (HMBS) are slowing down in the first half of 2018, potentially signaling growing stability on the secondary market.

The St. Johns, Fla.-based Baseline Reverse tracks the conditional prepayment rate (CPR) for each HMBS issued on the marketplace, with a slower speed indicating a more attractive product for investors. So far, during the first half of 2018, that rate has slowed for issuers in multiple different “vintage” years.

“The most exciting takeaway from this is that speeds in total have been slower in [the first half of] 2018 than they were in Q4 2017,” Baseline Reverse founder Dan Ribler told RMD.


HMBS data is broken into loan cohorts based on the year in which they were issued — for example, a loan first securitized on the secondary market in 2016 will always be associated with that year, even as it remains active for an extended period of time.

Among HMBS issued in 2016, Ocwen has led the way so far this year with a CPR of 8.00. But during the fourth quarter of 2017, the leader among that group was American Advisors Group with a rate of 8.61.

Similarly, Ocwen led the pack for 2015-vintage loans in the fourth quarter of 2017 with a prepay rate of 16.80; during the first half of 2018, leader Live Well Financial saw a CPR of 10.70.

Reverse Mortgage Funding currently sits atop the “best bonds” list for HMBS issued in 2018, with a CPR of 1.71; Ocwen and Finance of America Reverse followed with 2.13 and 2.27, respectively.

“Consistent, slow prepay speeds are excellent for the industry and for issuers,” Ribler said. “Slow speeds mean better bond pricing and longer HMSR [mortgage servicing rights] life. Let’s hope this trend continues.”

Written by Alex Spanko

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  • The problem with this type of forecasting is using short-term results to predict long-term results. Financial assessment merely deferred the date of HECM termination on many new vintage HECMs. There are now much fewer foreclosures from property charge defaults. In the lull of deferral, prepayments will go down but as those deferrals turn into terminations, the rate of prepayments could easily rise.

    However, for now the immediate outlook is good.

  • For those of use not as familiar with secondary market metrics, can someone provide the meaning of a “CPR” of 1.71 compared to 16.8?

    • The author identifies CPR above as the “conditional prepayment rate” (in the first sentence of the second paragraph of the column itself).

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