Mr. October Comes Through for Team HMBS

HMBS issuance totaled $642 million in October 2019, as lower rates continued to strengthen new production. 82 pools were issued in October, including about $426 million of new unseasoned HECM first participation pools, the highest monthly total for new production this year, and the fourth straight monthly increase.

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. Even with this month’s issuance, the HMBS market will be hard pressed to equal last year’s totals. For the entire year of 2018, HMBS issuance totaled about $9.6 billion, and $10.5 billion in 2017. HMBS issuers sold 99 pools totaling $1.018 billion in October 2018.

October’s production of $426 million of original new loan pools surpasses $393 million in September, $390 million in August, $321 million in July, $331 million in June, $325 million in May, $300 million in April, $277 million in March, $274 in February, and $304 million in January. Last month’s tail pool issuances totaled $216 million, on the low end of the range for recent tail issuance. As predicted, we are likely seeing the benefit of lower interest rates helping new origination volume.

October 2019 issuance divided into 34 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 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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