HREMIC Issuance First Half 2017: A Familiar Pattern

HREMIC issuance for the first half of 2017 was $5.44 billion, eclipsing 2016’s first half issuance total of $5.43 billion, and on pace to set a fourth consecutive annual record. Second quarter volume was $2.53 billion, off 13% from the near record quarterly issuance of $2.91 billion set in 2017Q1.

There were 14 transactions underwritten by three sponsors, Nomura, Bank of America Merrill Lynch, and Citigroup. Nomura remains the #1 issuer, with $3.2 billion, Bank of America Merrill Lynch was second with $1.4 billion, and Citigroup was third with $853 million. Life-to-date BAML has issued $19.2 billion of all HREMICs for a 39% market share, and Nomura has issued $13.3 billion for a 27% market share.

Approximately 90% of outstanding HMBS securities have been resecuritized into HREMICs, up from 85% at the end of 2017Q1. At this point, substantially all HMBS are finding their way into HREMIC securitization. A stronger and broader bid for the Interest-Only HREMIC classes emerged last year, and as a result the HREMIC structure, which allows issuers to create bond classes such as these “IO” securities, has become the most profitable option.

HREMIC collateral consists of HMBS, which are Ginnie Mae guaranteed pass-through securities. HMBS are backed by pools of participations of HECMs, which are FHA-insured reverse mortgages. This double layer of government guarantee, combined with the relatively high coupon and favorable prepayment patterns of the underlying loans, results in very favorable execution, even when compared to other Ginnie Mae “forward mortgage” securities.

New View Advisors compiled these rankings from publicly available Ginnie Mae data.

Comments are closed.