Summer BBQ With Seasoning: August HMBS Issuance Soars With Old Collateral

HMBS issuers created approximately $996 million in new HMBS pools during August 2016, the highest total this year, but with original issuance totals typical of the post-Financial Assessment HECM origination market. Last month’s HMBS issuance total increased 41% from July’s $704 million, and 36% from August 2015’s $730 million. Issuers sold 96 pools in August 2016, divided into 50 original pools and 46 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 decreased to $467 million from $497 million in July. However, $321 million of original pools backed by highly seasoned HECM loans were issued, resulting in the highest monthly HMBS issuance total so far this year. The largest pool was backed by HECM loans averaging over ten years old.

Total outstanding HMBS ticked up to $54.7 billion, up $325 million from July. We estimate that August HMBS was composed of approximately $169 million in negative amortization, plus the $996 million in new issuance, minus a record $839 million in payoffs. Payoffs figure to climb still higher as more seasoned HECM loans liquidate or reach 98% of their Maximum Claim Amount.

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 $209 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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