HMBS Issuance January 2016: New Year, Slow Start

HMBS issuers began 2016 by issuing only $651 million in new HMBS during January, down from December’s $685 million and January 2015’s $712 million. January’s issuance volume reflects the “new normal” of the HECM program post-financial assessment: $468 million in original loan pools (the lowest since September 2014) and tail issuance of $182 million. A total of 96 pools were issued, consisting of 45 original issuances and 51 tail pools.

Total outstanding HMBS ticked upward to about $53.4 billion, despite payoffs exceeding new issuance for the second month in a row. We estimate that this relatively small $120 million increase is composed of approximately $163 million in negative amortization, plus the $651 million in new issuance, minus $694 million in payoffs. Payoffs increased last year, driven primarily by put-backs to HUD of seasoned HECM loans whose loan balances have reached 98% of their Maximum Claim Amount.

Fixed Rate HMBS accounted for 16% of January’s issuance, compared to 19% for all of 2015, and 32% in 2014.

Original HMBS pools are created when a pool of FHA-insured Home Equity Conversion Mortgages (“HECMs”) is securitized for the first time. Tail HMBS issuances are HMBS pools created from the Uncertificated Portions of previously securitized HECMs. Newly originated loans usually comprise a large majority of HMBS issuance in any given month. As a result, HMBS issuance is a good barometer of recent HECM production.

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

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