It Rains, but Doesn’t Pour for April HMBS Issuers

HMBS issuers created approximately $775 million in new HMBS pools during April 2016, with a weak tally in original pools mitigated by a $106 million seasoned pool. Last month’s HMBS issuance total improved on March’s $639 million but was down from April 2015’s $798 million. Issuers sold 94 pools, evenly divided into 47 original pools and 47 tail pools. Original pools are those HMBS pools backed by the first participation in a previously uncertificated HECM loan, typically a recently originated HECM loan. Only $455 million in original new production loan pools were issued, but this was an improvement over March’s $420 million, the lowest tally since September 2014. The seasoned pool padding this month’s totals was backed by 10-year-old CMT loans.

FHA’s new Financial Assessment requirements for newly originated HECM loans are the main driver for the reduced loan volume, which has reduced monthly HMBS issuance from $874 million in May 2015.

Total outstanding HMBS is about $54 billion, up from just under $53.8 billion at the end of March. We estimate that this increase is composed of approximately $168 million in negative amortization, plus the $775 million in new issuance, minus a record $753 million in payoffs.

Original HMBS pools are created when a pool of FHA-insured Home Equity Conversion Mortgages (“HECMs”) is securitized for the first time. Tail HMBS issuances are HMBS pools created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance. Tail Issuances accounted for about $214 million of April’s total, the fourth highest monthly tail issuance on record. Newly originated loans comprise a large majority of HMBS issuance in any given month. As a result, HMBS issuance is a good barometer of recent HECM production.

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

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