March 2019 HMBS Issuance: Groundhog Day in March

HMBS issuance held steady in March 2019 at just under $558 million. March issuance was consistent with the sharply lower issuance of recent months, despite one highly seasoned pool that bumped up volume. 88 pools were issued in March, including about $277 million of new first participation pools. HMBS float shrinkage will continue as March’s payoffs are almost certain to outweigh new issuance and interest roll-up.

HMBS issuers brought just under $1.7 billion to market in the first quarter of 2019. This is the lowest quarter of HMBS issuance since the third quarter of 2014. 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 included some HMBS issuance backed by new HECM loans originated at higher PLFs.

Production of original new loan pools was consistent with the $274 million issued in February, $304 million in January and $277 million in December, but well below the $360 million in September 2018. Last month’s tail pool issuances totaled $220 million, within the range of recent tail issuance. For the past few months, the new issuance market has settled into Groundhog Day mode, with very similar volume statistics other than the occasional seasoned first participation issue. For comparison, HMBS issuers sold 115 pools totaling $626 million in March 2018.

March 2019 issuance divided into 33 original pools and 55 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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