HMBS June 2024: HMBS 2.0 – Cure For The Summertime Blues?

The HMBS new issue market fell in June. HECM Mortgage-Backed Securities (“HMBS”) issuance totaled $497 million, $29 million lower than May’s $526 million. 86 pools were issued in both June and May. HMBS issuance remains near historical lows, comparing monthly issuance dating back to 2010.

Ginnie Mae published its “HMBS 2.0” Term Sheet for comment last week. The new HMBS program will allow securitization of HECM loans that have UPBs in excess of 98% of the Maximum Claim Amount. Once implemented, HMBS 2.0 will increase HMBS issuance substantially by financing most mandatory buyouts, which exceeded $500 million last month according to Recursion.

FAR was the top issuer again in June with $159 million – $2 million more than May’s $157 million. Issuance from Longbridge decreased by $8 million to $110 million. Mutual of Omaha and PHH issued $95 million and $85 million respectively. Ginnie Mae/RMF (aka “Issuer 42”) again issued no HMBS pools.

HMBS issuance set a record in 2022, with nearly $14 billion issued. Total issuance for 2023 was approximately $6.5 billion. 2024 total issuance through June totals $2.8 billion – $328 million lower than at this time last year and $5.6 billion lower than at this time in 2022.

June’s original (first participation) production of $331 million was $30 million lower than May’s $361 million. June’s original new loan pool production was substantially lower than that of June 2023, when approximately $385 million in original new HMBS pools were issued.

The 86 pools issued in June consisted of 24 first-participation or original pools and 62 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 $166 million, below the typical range.

Notable in the June HMBS issuance data are 26 pools with aggregate pool size less than $1 million. Issuers are taking advantage of Ginnie Mae’s provision to issue pools as small as $250,000. This represents $14.3 million of UPB in June that otherwise would not have been issued. Ginnie Mae published APM 23-11 in September which allows participations from the same loan to be pooled more than once in the same month. The aggregate of participations pooled in June for which more than one participation from the same loan was pooled is $55 million, of which $2 million were first participations.

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

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