January 2019: HMBS Market Imitates Super Bowl with Low Scoring Month

HMBS issuance fell in January 2019 to just under $614 million, despite help from one highly seasoned pool of original collateral. January issuance was very similar to recent months’ weak numbers, which were among the lowest issuance levels in over four years. 97 pools were issued in January, including just over $300 million of new first participation pools. HMBS float shrinkage will continue as January’s prepayments are almost certain to outweigh new issuance and interest roll-up.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of Fiscal Year 2018. For the entire year of 2018, HMBS issuance totaled about $9.6 billion, compared to $10.5 billion in 2017. The HMBS market will be hard pressed to equal last year’s totals, which also included HMBS issuance backed by new HECM loans originated at higher PLFs.

Production of original new loan pools was about $304 million, up from last month’s $277 million, and November’s $298 million, but below October’s $325 million and $360 million in September. Last month’s tail pool issuances totaled $259 million, within the range of recent tail issuance. By comparison, HMBS issuers sold 111 pools totaling $869 million in January 2018.

January 2019 issuance divided into 36 original pools and 61 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 can generate profits for years, helping HMBS issuers during challenging times.

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

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