The HMBS new issue market improved over July with a small rebound in August, but overall it’s been a bad summer. HECM Mortgage-Backed Securities (“HMBS”) issuance totaled $572 million in August, up from July’s $518 million. 97 pools were issued, low by historical standards.
On November 30 of last year, Reverse Mortgage Funding (“RMF”), the largest HMBS issuer of record, filed for bankruptcy. As a result, Ginnie Mae acquired RMF’s HMBS portfolio. Ginnie Mae/RMF (aka “Issuer 42”) issued no HMBS pools in July.
On March 31, American Advisors Group was purchased by Finance of America (“FAR”), continuing the industry’s consolidation, leaving four issuers with approximately 90% total market share. Last month, FAR was the top issuer with $228 million; Longbridge was the only other issuer to top $100 million.
HMBS issuance set a new record in 2022, with nearly $14 billion issued. In 2023, HMBS issuers will not come anywhere near those numbers; the first eight months totaled approximately $4.3 billion.
August’s original (first participation) production of $391 million was up 17% from July’s weak $335 million, and more in line with June’s $384 million, May’s $353 million, and April’s $379 million. Most of August’s increase in first-participation issuance was a function of a $60 million increase from FAR. August new issuance was very weak by historical standards, less than half of August 2022’s $988 million.
The 97 pools issued in August consisted of 24 first-participation or original pools and 73 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. Last month’s tail pool issuances totaled $181 million, below the typical range.
Notable in the August HMBS issuance data are the 26 pools with aggregate pool size less than $1,000,000. Issuers are taking advantage of the new provision from Ginnie Mae to issue smaller pools, designed to provide warehouse financing relief to Issuers.
New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.