HMBS September 2022: New School Year May Bring Difficult Lessons

HECM Mortgage-Backed Securities (“HMBS”) issuance fell in September to $966 million, falling for the fifth straight month as higher interest rates continued to take their toll. HMBS issuance remained below $1 billion for only the second time in 18 months.

With nine months in the books and over $11.6 billion issued, HMBS is still on pace to eclipse 2022’s record $13.2 billion issuance total. However, for the foreseeable future higher interest rates will challenge the reverse mortgage market, driving down home price appreciation and the Principal Limit Factors that determine how much HECM originators can lend against those likely-falling home values.

September’s original (first participation) production fell to $744 million, slightly below August’s $749 million, but significantly below July’s $975 million, June’s $1.1 billion, May’s $1.2 billion, and barely half April’s record $1.4 billion in new issuance. September’s original new loan pool production was also much less than that of September 2021, when approximately $1.03 billion in original new HMBS pools were issued.

90 pools were issued in September: 42 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. Last month’s tail pool issuances totaled $222 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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