September 2018 HMBS: Try to Remember That Time in September (of Last Year)

HMBS issuance rose in September 2018 to just over $587 million, a small increase over August, but still one of the lowest issuance months in recent years. No highly seasoned pools were issued. In all, 104 pools were issued in September. When all the data are in, we expect another $1 billion plus in payoffs to shrink HMBS float again.

Reverse mortgage lenders face a new era of reduced volume, primarily due to the lower Principal Limit Factors (“PLFs”) for Home Equity Conversion Mortgages (“HECMs”) effective last year. Rising interest rates will not help either, as they generally require lower PLFs.

Production of original new loan pools was about $360 million, up from August’s $344 million, but these small, short-term upticks in HMBS production are hardly proof of a recovery. Last month’s tail pool issuances totaled $213 million, within the range of recent tail issuance. By comparison, HMBS issuers sold 114 pools totaling $879 million in September 2017.

September 2018 issuance divided into 45 original pools and 59 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. As we noted last month, tail HMBS issuance can generate profits for years, helping HMBS issuers in challenging periods.

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

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