HMBS July 2019: It’s the Time of the Seasoned; Live Well’s Not There

HMBS issuance rose in July 2019 to over $1 billion, helped by a large highly seasoned pool. 83 pools were issued in July, including about $321 million of new unseasoned HECM first participation pools, the third highest monthly total for new production this year. Half of this month’s total issuance, the largest in 15 months, was from one large highly seasoned CMT pool.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of Fiscal Year 2018. For the entire year of 2018, HMBS issuance totaled about $9.6 billion, compared to $10.5 billion in 2017. Even with this month’s issuance, 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. HMBS issuers sold 100 pools totaling $545 million in July 2018.

Live Well is no longer the issuer of record for any Ginnie Mae HMBS pools. According to the Ginnie Mae data, RMF acquired the rights to the Live Well pools issued from December 2018 through June 2019. These pools totaled just under $200 million in unpaid balance as of last month. Late last year, RMF acquired over $4 billion in issuer rights, consisting of all outstanding HMBS pools issued by Live Well through November 2018. Pool BN4497 has the distinction of being the last pool issued by Live Well.

July’s production of original new loan pools was about $321 million, compared to $331 million in June, $325 million in May, $300 million in April, $277 million in March, $274 in February, and $304 million in January. Last month’s tail pool issuances totaled $222 million, within the range of recent tail issuance. With rates trending lower, we may be seeing the benefit of lower interest rates helping new origination volume.

July 2019 issuance divided into 28 First-Participation or Original pools and 55 tail pools, exactly the same totals as June. 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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