HMBS May 2021: May Flowers

HMBS issuers posted another very strong month with just over $1.0 billion of issuance in May, the third month of the post-LIBOR era. February 2021 was the last month in which Ginnie Mae allowed pooling of new HMBS pools backed by first participations of LIBOR-based HECMs. The Constant Maturity Treasury “CMT” index is now the only index for new adjustable rate HECM loans and will remain so until a transition to another index, likely the Secured Overnight Financing Rate, or “SOFR.” 105 pools were issued in May, including 45 first-participation CMT pools. Before January 2021 no new first-participation CMT pools had been issued for many years.

A record $10.6 billion in HMBS was issued in 2020, easily beating 2019’s total of $8.3 billion and 2018’s $9.6 billion. 2010 remains the all-time HMBS volume year with $10.8 billion issued, when Principal Limits were high and no borrower financial assessment safeguards had been established. With nearly $5 billion issued so far, that record may fall this year if interest rates stay low.

May’s production of original new loan pools was $862 million, compared to April’s record $900 million, March’s $671 million, February’s $693 million, January’s $552 million, December’s $878 million, and November’s $765 million. Approximately $586 million in original new loan pools were issued in May 2020.

May issuance divided into 57 first-participation or original pools, and 48 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. May’s tail pool issuances totaled $182 million, within the range of recent months.

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

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