Record Tail Issuance Drives October’s Reverse Mortgage Securities

Issuers of Home Equity Conversion Mortgage mortgage-backed securities (HMBS) created $789 million in new HMBS pools during October, driven by a record tail issuance of $291 million and some rekindled activity from Wells Fargo, according to the latest commentary from New View Advisors.

The record tail issuance includes two pools totaling nearly $100 million issued by Wells Fargo, marking the company’s first HMBS issuance since June 2012.¬†Without the contributions from Wells Fargo, HMBS issuance would have been “lackluster” at $689 million, below this year’s running average,¬†according to New View Advisors.

In 2015, HMBS issuance is averaging just over $753 million per month, substantially higher than last year’s $550 million monthly average, according to the data New View Advisors compiles from publicly available Ginnie Mae data as well as private sources.

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Meanwhile, October’s tally of $789 million surpasses September’s $680 million, as well as its year-ago total of $690 million in October 2014.

October 2015 HMBS comprised 112 pools, consisting of 55 original issuances and 57 tail pools. Original HMBS pools are created when a pool of FHA-insured 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.

Because newly originated loans comprise a large majority of HMBS issuance in any given month, New View Advisors states that HMBS issuance is a good barometer of recent HECM production.

Total outstanding HMBS is approximately $52.6 billion, up from just under $52. 4 billion at the end of September.

“We estimate that this increase is composed of approximately $161 million in negative amortization, plus the $789 million in new issuance, minus about $714 million in payoffs,” writes New View Advisors in its commentary.

Total outstanding HMBS has been growing each month, albeit at a slower and slower rate. Without the Wells Fargo pools, New View Advisors notes that HMBS float would have increased by less than $130 million.

Compared to September, outstanding fixed rate HMBS has fallen from $29.8 billion to $29.5 billion in October.

“With payoff amounts increasing each month, total HMBS outstanding could shrink for the first time,” writes New View Advisors.

Read the New View Advisors commentary.

Written by Jason Oliva