Reverse Mortgage Securities Issuance Up 29% Year Over Year

Issuance of Home Equity Conversion Mortgage (HECM) mortgage-backed securities (HMBS) in February dropped slightly from its January high, but remained up 29% year over year,  according to the most recent commentary from New View Advisors on publicly available Ginnie Mae data.

HMBS issuers sold $635 million in new pools throughout the month of February, the third-highest total since December 2013. In comparison, HMBS issuers sold $712 million in new pools in January, marking the highest tally since December 2013.  

Though issuance was down from January, it posted a 29% increase from February 2014, when a “paltry” $494 million was issued, New View writes. 

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This marks the fifth straight month that issuance has exceeded $600 million, a trend New View expects to continue as interest rates remain low and with the financial assessment postponed. 

In February, tail issuance accounted for 23% of the month’s total dollar amount, and roughly half of the 83 pools issued.

“Issuers continue to benefit from both the higher PLFs enacted in August 2014 and the relatively large borrower draws now rolling in as many loans reach their 13th month, when draw restrictions expire,” New View writes. 

Fixed rate issuance also held steady at about 24% of total HMBS issuance in February, reflecting the typical product mix brought on by Federal Housing Administration’s program changes.

Newly originated loans comprise a large majority of HMBS issuance in any given month, and a “very large majority” of current HECM production are securitized into HMBS. As a result, New View writes, HMBS issuance is a good barometer of recent HECM production.

When looking at broader Ginnie Mae issuance overall—including forward, reverse, Ginnie Mae I and II securities—issuance in 2015 is up, with $53.6 billion, compared to just over $44 billion in the first two months of 2014.

Access the New View Advisors commentary here

Written by Emily Study