HMBS April 2022: April Showers Bring A New Record, What May Happen Next?

HECM Mortgage-Backed Securities (“HMBS”) issuers set another new record in April, issuing over $1.6 billion in new HMBS. This shatters the previous mark by nearly $300 million. Refinancing continues to drive this record HMBS volume.

Given the lag between HECM loan origination and HMBS issuance, the new HECMs backing April’s HMBS pools do not fully reflect the rapid rise in interest rates over the past two months. The numbers for May and June issuance will test the resilience of this refinancing wave, which began with lower interest rates but continued its momentum from strong home price appreciation and higher FHA lending limits.

HMBS issuance totaled $13.2 billion for 2021, 22% more than the previous record set in 2010. With only four months in the books and over $5.6 billion issued, HMBS is on pace to set another new record in 2022.

April’s original (first participation) production smashed previous monthly volume records, with $1.4 billion in new issuance. This easily exceeded March’s production of original new loan pools totaling $1.13 billion, February’s $1.12 billion and January’s previous record of $1.18 billion. Approximately $900 million in original new loan pools were issued a year ago, in April 2021. Last April’s total set a record, yet this April exceeds it by half a billion dollars.

113 pools were issued in April: 67 first-participation or original pools, and 46 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 $217 million, within the typical range.

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

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