December 2018 HMBS: Mostly Coal in the Stocking, Annual Issuance Falls Over $900 Million

HMBS issuance rose in December 2018 to just over $619 million, helped by three highly seasoned pools of original collateral. Without those three issues, December issuance was very similar to November’s weak numbers, which were the lowest issuance level in over four years. Just 95 pools were issued in December. Less than $300 million of new first participation pools were issued. Additional shrinkage in HMBS float seems likely this month.

For the entire 2018 calendar year, HMBS issuance totaled about $9.6 billion, compared to $10.5 billion in 2017. The various headwinds facing the market, higher interest rates, lower PLFs, etc., will probably reduce volume further in 2019.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the new lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Mortgages (“HECMs”) effective last Fiscal Year.

Production of original new loan pools was just under $277 million, down from November’s $298 million, October’s $325 million and $360 million in September. December’s tail pool issuances totaled $237 million, within the range of recent tail issuance. By comparison, HMBS issuers sold 106 pools totaling $1.3 billion in December 2017.  After last month’s portfolio sale, Live Well Financial was back in the market, issuing approximately $46 million of HMBS.

December 2018 issuance divided into 39 original pools and 56 tail pools. 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. Tails are not from new loans, but they do represent new amounts lent. Tail HMBS issuance can generate profits for years, helping HMBS issuers during challenging times.

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

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