HMBS May 2023: Slouching Round the Maypole

The HMBS new issue market posted its biggest month of 2023, but that’s not saying much. Strong tail issuance masked a decline in new loan production. HECM Mortgage-Backed Securities issuance totaled $580 million in May, topping April’s $534 million. 82 pools were issued, low by historical standards.

On November 30 of last year, Reverse Mortgage Funding, the largest HMBS issuer of record, filed for bankruptcy. As a result, Ginnie Mae acquired RMF’s HMBS portfolio. Ginnie Mae/RMF aka Issuer 42 issued no HMBS pools in May.

On March 31, American Advisors Group was purchased by Finance of America Reverse, continuing the industry’s consolidation, leaving four issuers with approximately 90% total market share. Last month, FAR was the top issuer with $200 million.

HMBS issuance set a volume record in 2022, with nearly $14 billion issued. HMBS issuers are very unlikely to come anywhere near those numbers in 2023; the first five months totaled just over $2.5 billion.

May’s original (first participation) production of $353 million fell from April’s $379 million, but it was better than March’s anemic $259 million, February’s $322 million, and January’s $347 million. Still, May was very weak by historical standards, less than one-third of May 2022’s $1.2 billion in new issuance.

The 82 pools issued in May consisted of 20 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 $226 million, above the typical range. This is likely an echo of April 2022’s record issuance, as the draw restrictions on many year-old HECMs expired.

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

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