Record-Smashing HREMIC Issuance Tops $9.5 Billion in 2015

Total HREMIC issuance topped $9.5 billion in 2015, easily shattering the previous full-year record of $6 billion in 2012, according to the latest commentary from New View Advisors.

Even before 2015 concluded, HREMIC issuance was already trending well-ahead of the previous year’s $5 billion total, reaching $6.5 billion through the first nine months of the year.

In total, 2015 saw 33 transactions underwritten by four sponsors, including Nomura (NYSE: NMR), Bank of America Merrill Lynch (NYSE: BAC), Barclays (NYSE: BCS) and Credit Suisse (NYSE: CS). Life-to-date, Bank of America Merrill Lynch has issued 42% of all HREMICs, Barclays 17% and Nomura 14%.

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WIth $3.4 billion issued throughout the year, Nomura remained the top issuer for 2015, while Bank of America was second with $2.9 billion and Barclays took third with six issuances totaling $1.8 billion, according to the publicly available Ginnie Mae data compiled by New View Advisors. Ranking fourth, Credit Suisse issued $1.4 billion for a 9% market share.

Approximately 64% of outstanding HECM mortgage-backed securities (HMBS) have been re-securitized into HREMICs, up from 60% at the end of the third quarter of 2015, noted New View Advisors.

“A stronger bid for the Interest-Only HREMIC classes emerged this year,” writes New View Advisors in its commentary. “The HREMIC structure, which allows issuers to create bond classes such as these ‘IO’ securities, is increasingly the most profitable option.”

HREMIC collateral consists of HMBS, which New View Advisors notes are Ginnie Mae guaranteed pass-through securities backed by pools of participations of FHA-insured Home Equity Conversion Mortgages (HECMs).

“This double layer of government guarantee, combined with the relatively high coupon and favorable prepayment patterns of the underlying loans, results in a very favorable execution, even when compared to other Ginnie Mae ‘forward mortgage’ securities,” writes New View Advisors.

Read the New View Advisors Commentary.

Written by Jason Oliva