HMBS September 2017: Slow Climb Up the Down Escalator

The HMBS market remained stuck – again – at $55 billion in September. HMBS Prepayments topped $1 billion, but was balanced by 114 new pools from 14 different issuers totaling over $879 million.

September issuance divided into 49 original pools and 65 tail pools. No seasoned original new loan pools were issued. Production of original new loan pools was a healthy $627 million, a typical total for this year.

Original pools are those HMBS pools backed by first participations in previously uncertificated HECM loans. Tail HMBS issuances are HMBS pools consisting of subsequent participations. In other words, tail pools are created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance. September’s tail issuance was strong: about $252 million.

Last month, total outstanding HMBS grew by only $12 million from August. We estimate that last month’s change in HMBS balance was composed of over $184 million in negative amortization, plus the $879 million in new issuance, minus $1.05 billion in payoffs. Last month’s payoffs were the third highest ever; payoffs have exceeded new issuance for thirteen months in a row.

Payoff figures are still high as more seasoned HECM loans liquidate or reach 98% of their Maximum Claim Amount (“MCA”). Our friends at RecursionCo show that payoffs from 98% MCA assignments totaled approximately $614 million last month, the second highest total ever. According to Recursion, the 98% MCA puts were only $92 million, or 29.8% of payoffs in September 2013.

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

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