In early 2021, GNMA began issuing a new class of custom pools with prefix “RG.” These pools are re-securitizations of previously delinquent loans which were repurchased from pools during the pandemic.[1] Loans in these pools are unmodified, keeping the original rate and term of the mortgage note. In the analysis below, we review the recent performance of these pools at loan-level detail. The first RG pools were issued in February 2021, growing steadily to an average rate of $2B per month from Q2 onward, with a total outstanding of $21 billion. 

 
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The majority of RG issuance has included loans that are two to seven years seasoned and represent a consistent 2-3% of the total GNMA market for those vintages, dashed line below.

Coupons of RG pools are primarily concentrated between 3.0s through 4.5s, with the top-10 Issuers of RG pools account for nearly 90% of the issuance.

Below, we compare speeds on GNMA RG pools under various conditions. First, we compare speeds on loans in RG pools (black) versus same-age multi-lender pools (red) over the last twelve months. When out of the money, RG pools are 4-5 CPR slower than comparably aged multi-lender pools but provide a significantly flatter S-curve when in-the-money.

Next, we plot the S-curve for all GNMA RG loans with overlays for loans that are serviced by banks (green) and non-banks (blue). Bank-serviced RG loans prepay significantly slower than non-banks by an average of 9 CPR weighted across all incentives. Further, this difference is caused by voluntary prepays, with buyouts averaging a steady 4% CBR, plus or minus 1 CBR, for both banks and non-banks with no discernable difference between the two (second graph).

Finally, we analyzed the loan-level transition matrix by following each RG loan through its various delinquency states over the past year. We note that the transition rate from Current to 30-day delinquent for RG loans is 1.6%, only marginally worse than that of the entire universe of GNMA loans at 1.1%. RG loans transitioned back from 30->Current at similar rates to the wider Ginnie universe (32.3%) and the 30->60 transition rate for RG loans was marginally worse than the Ginnie universe, 30.8% versus  24.0%.[2]

Monthly Transition Rates for Loans in GNMA RG Pools: In summary, loans in RG pools have shown a substantial level of voluntary prepayments and comparatively low buyouts, somewhat unexpected especially in light of their recent delinquency. Further, their overall transition rates to higher delinquency states, while greater than the GNMA universe, is markedly better than that of reperforming loans just prior to the outbreak of COVID.

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