Hold the Fireworks: Flat Issuance and Supply Mark July HMBS

HMBS issuers created approximately $704 million in new HMBS pools during July 2016, with issuance totals typical of the post-Financial Assessment HECM origination market. Last month’s HMBS issuance total increased slightly from June’s $694 million total but fell well short of July 2015’s $809 million. Issuers sold 101 pools in July 2016, divided into 49 original pools and 52 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. Production of original new loan pools increased to $497 million. No seasoned original pools were issued.

Total outstanding HMBS ticked up to $54.4 billion, up only $77 million from June, the smallest increase in recent years. We estimate that July HMBS was composed of approximately $169 million in negative amortization, plus the $704 million in new issuance, minus a hefty $798 million in payoffs. Payoffs figure to climb still higher as more seasoned HECM loans liquidate or reach their 98% of Maximum Claim Amount threshold.

Original HMBS pools are created when a pool of FHA-insured Home Equity Conversion Mortgages (“HECMs”) is securitized for the first time. 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 $207 million, typical of this year’s production. This appears to be the new issuance range for the industry: New production between $400 – $500 million per month, tail issuance of just above $200 million per month, plus the occasional seasoned loan HMBS securitization.

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

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