HMBS June 2022: June Too Soon For Swoon, But End to Boon Looms

HECM Mortgage-Backed Securities (“HMBS”) issuance fell in June to $1.3 billion, compared to $1.5 billion in May and April’s record $1.6 billion, as the refinancing wave continues to ebb. However, production remains strong by historical standards.

Given the lag between HECM loan origination and HMBS issuance, the new HECMs backing June’s HMBS pools do not fully reflect the rapid rise in interest rates over the past several months. The numbers for July issuance will likely show further declines.

HMBS issuance totaled $13.2 billion for 2021, smashing the previous record set in 2010. With only six months in the books and over $8 billion issued, HMBS is still on pace to set another new record in 2022.

June’s original (first participation) production fell to $1.1 billion, compared to $1.2 billion in May, and well below April’s record $1.4 billion in new issuance. Still, June’s original new loan pool production was close to March, which totaled $1.13 billion, February’s $1.12 billion and January’s $1.18 billion. Approximately $823 million in original new loan pools were issued a year ago, in June 2021.

100 pools were issued in June: 53 first-participation or original pools, and 47 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 $220 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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