HMBS April 2019: Silent Spring

HMBS issuance held steady in April 2019 at just over $567 million.  April issuance was consistent with the sharply lower issuance of recent months, despite a few highly seasoned pools that bumped up issuance volume.  86 pools were issued in April, including about $300 million of new first participation pools. For comparison, HMBS issuers sold 120 pools totaling $1.2 billion in April 2018.  HMBS float shrinkage will continue as April’s payoffs are almost certain to outweigh new issuance and interest roll-up.

Live Well Financial issued 9 HMBS pools in April totaling about $32 million. Since selling off its HMBS book to RMF last year, Live Well has issued over $160 million in HMBS pools.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of FY2018.  For calendar year 2018, HMBS issuance totaled $9.6 billion, compared to $10.5 billion in 2017.  The HMBS market will be hard pressed to equal last year’s totals, which included some HMBS issuance backed by new HECM loans originated at higher PLFs.

For 2019, the new issuance market has settled into Groundhog Day mode, with very similar volume statistics other than the occasional seasoned first participation issue: $300 million in April, $277 million in March, $274 in February, and $304 million in January.  April’s tail pool issuances totaled $221 million, within the range of recent tail issuance.

April 2019 issuance divided into 36 original pools and 50 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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