HMBS April 2021: April Showers of HMBS

HMBS issuers posted a very strong April with nearly $1.1 billion in new issuance, the second month of the post-LIBOR era. February 2021 was the last month in which Ginnie Mae allowed pooling of new HMBS pools backed by first participations of LIBOR-based HECMs. The Constant Maturity Treasury “CMT” index is now the only index for new adjustable rate HECM loans and will remain so until a transition to another index, likely “SOFR,” the Secured Overnight Financing Rate. 104 pools were issued in April, including 47 first-participation CMT pools. Before January 2021 no new first-participation CMT pools had been issued in many years.

A record $10.6 billion in HMBS was issued in 2020, easily beating 2019’s total of $8.3 billion and 2018’s $9.6 billion. 2010 remains the all-time HMBS volume year with $10.8 billion issued, when Principal Limits were high and no borrower financial assessment safeguards had been established. That volume record may be challenged in 2021 if interest rates stay low.

April production of original new loan pools was a record $900 million, compared to March’s $671 million, February’s $693 million, January’s $552 million, December’s previous record of $878 million, and November’s $765 million. Approximately $470 million in original new loan pools were issued in April 2020.

April issuance divided into 59 first-participation or original pools and 45 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 is essential for HMBS issuers to finance their monthly advances, such as borrower draws and FHA mortgage insurance premiums. Last month’s tail pool issuances totaled $194 million, slightly below the typical $200-$250 million range.

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

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