HMBS September 2016: Fall Harvest is Bumper Crop of New Collateral and Record Number of Pools

HMBS issuers created a record number 119 pools in September, this time driven by new HECM loans, not seasoned collateral or tail issuance of new balances from old loans. Production of original new loan pools increased to an impressive $623 million, up from $467 million in August. Issuance totaled approximately $836 million in September, the third highest monthly dollar volume this year. September’s HMBS issuance total decreased 16% from August’s $996 million, but August’s high totals were augmented by $321 million of new pools backed by very seasoned loans. New original and unseasoned pool production rose 34% from August 2016, and total issuance was up 23% from September 2015’s $680 million. The record pools tally divided into 63 original pools and 56 tail pools.

Original pools are those HMBS pools backed by the first participation in a previously uncertificated HECM loan, typically a recently originated HECM loan.   The original pool totals for September are a breakout from the typical post-Financial Assessment range of $400 – $500 million per month. September’s tail issuance was typical for HMBS tail issuance in 2016. No original pools backed by highly seasoned HECM loans were issued in September.

Tail HMBS issuances are HMBS pools created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance. Tail Issuance strengthened to about $212 million, typical of this year’s production.

Total outstanding HMBS ticked up to $54.9 billion, up about $157 million from August. We estimate that September HMBS was composed of approximately $170 million in negative amortization, plus the $836 million in new issuance, minus a record $850 million in payoffs. Payoffs figure continue to climb as more seasoned HECM loans liquidate or reach 98% of their Maximum Claim Amount.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

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