With the rapid rise of social distancing and a looming recession, investor thoughts are turning towards mortgage delinquencies and defaults. In GNMAs, loans that are 90+ days delinquent may be bought out of the pool by the servicer. When a servicer does this, the repurchase shows up as an involuntary prepay for the investor. GNMA servicers may buy the loan out a pool when it turns 90 days delinquent or more but must do so using their own capital. Given this, we may start to see a separation in buyout behavior between well-capitalized bank servicers and more thinly capitalized non-bank servicers, with longer liquidation timelines for some entities over others.¹

The GNMA loan–level data shows each loan’s delinquency status, listed from current to 180+ days delinquent.² In Edge, users can run either a single pool or a portfolio and separate the loans into buckets by individual servicer. Users can simultaneously overlay other filters such as loan guarantor, geography, mark-to-market LTV, and other. Doing this at portfolio level can help quantify a portfolio’s exposure to various bank and non-bank servicers segregated by different loan characteristics. 

It is difficult to predict the exact repurchase differential we will see between bank and non-bank servicers, but for MBS investors, it will certainly be important to quantify the exposure at both pool and portfolio level as a first step. Most market participants expect a substantial uptick in the number of involuntary prepayments in the GNMA space. Edge lets users rapidly assess delinquency exposure across many different loan characteristics for an entire portfolio, which may matter more now than it ever has in recent history. 

RS EDGE: Loan-level Delinquencies in GNMA Pools

Loan-level delinquency by servicer for 2019-vintage GN Multi-lender pools, broken out by FHA/VA. This search is simple to execute in the Edge platform. Contact us for details. 

¹ In 2011-12, the market saw significant differences in buyout behavior, for example Bank of America was slow to buy out delinquent loans.

² On Bloomberg, the delinquency states 90 days onward are compressed into a single 90+ state.