No June Gloom: HMBS Issuance and Supply Remain Steady

HMBS issuers created approximately $694 million in new HMBS pools during June 2016, with issuance totals typical of the post-Financial Assessment HECM origination market. Last month’s HMBS issuance total declined from May’s $857 million total and also June 2015’s $845 million. May’s total was bolstered by highly seasoned original issuance, and last June’s HMBS numbers were inflated by the pre-FA origination rush. Issuers sold 104 pools in June 2016, divided into 49 original pools and 55 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. Production of original new loan pools matched last month’s $449 million tally. No seasoned original pools were issued.

Total outstanding HMBS remains at about $54.3 billion, up only $29 million from May, the smallest increase in recent years. We estimate that June HMBS was composed of approximately $169 million in negative amortization, plus the $694 million in new issuance, minus a record $834 million in payoffs. Payoffs figure to climb still higher as more seasoned HECM loans liquidate or reach the 98% of Maximum Claim Amount threshold.

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 Issuance strengthened to about $244 million, up from May’s total of $211 million.  This appears to be the new issuance range for the industry: new production between $400-$500 million per month, tail issuance of just above $200 million per month, plus the occasional seasoned loan HMBS securitization.

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

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