HREMIC Issuance 2018Q1: Last Gasp for Volume

HREMIC issuance for the first quarter of 2018 was $2.97 billion, the highest quarterly issuance total since the fourth quarter of 2015’s $3 billion. This volume trend is unlikely to continue based on the slowdown in HMBS.  There were 5 transactions in the quarter underwritten by two sponsors, Nomura and Citigroup. For 2018Q1, Nomura issued $1.6 billion of securities and Citigroup issued $1.4 billion.

Nomura has become the perennial lead issuer of HREMICs, though life-to-date Bank of America Merrill Lynch remains #1 with $19.6 billion of HREMICs for a 35% market share.  Nomura has issued $16 billion for a 28% life-to-date market share. BAML did not issue any HREMIC securities in the first quarter.

HREMIC collateral consists of HMBS, which are Ginnie Mae guaranteed pass-through securities. HMBS are backed by pools of participations of HECMs, which are FHA-insured reverse mortgages. This double layer of government guarantee, combined with the relatively high coupon and favorable prepayment patterns of the underlying loans, results in very favorable execution, even when compared to other Ginnie Mae “forward mortgage” securities.

New View Advisors compiled these rankings from publicly available Ginnie Mae data.

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