Reverse Mortgage Securities Issuance Falls Off Cliff to End 2013

The issuance of reverse mortgage-backed securities fell off a cliff to end 2013, with zero transactions in December, according to New View Advisors based on Ginnie Mae data.

HREMIC issuance—the real estate mortgage investment conduits that comprise Ginnie Mae-guaranteed reverse mortgage securities, or HMBS—for the full year 2013 was down 18% from the previous year, with 26 transactions totaling $4.95 billion. In contrast, there were 31 transactions in 2012 for a total of more than $6 billion. 

Fourth quarter issuance fell sharply with just three HREMICS totaling $313 million. December’s zero transactions marked the first month since October 2011 that no new HREMICs were issued, according to New View.


Bank of America Merrill Lynch remained the top issuer, New View notes, capturing the “issuance crown” again in 2013 with 10 transactions totaling $2.4 billion. Not only was it 2013’s biggest issuer, but BAML is number one all-time with 43 HREMICs for $9.8 billion. 

Knight Capital came in second with four issuances for $668 million, while relative newcomer Stifel Nicolaus came in third with $617 million of issuance.

View the full rankings, compiled by New View Advisors.

Written by Alyssa Gerace 

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  • With calendar year 2013 having over 15% more endorsements than calendar year 2012, what does the decline in issuance of HREMICs and HMBSs say about investor demand for HECMs.

    Some claim that the current premium rates being provided by lenders shows that the investor community has not changed its view of HECMs but the issuance levels in 2013 say something very different.

    • It might be more indicative of the change in UPB available for sale with the restrictions on fixed rate loans for much of 2013. PLF cuts plus utilization restrictions spell another divergence between loan counts and UPB available for securitization in 2014.

      • Great point, John — you wouldn’t happen to have access to any UPB/loan metrics before and after last year’s changes, would you? May well take twice the units to fund the same size pool…

      • I think Mike’s point below about HREMICs vs. HMBS issuance is probably the biggest factor, but avg UPB per funded loan went down from $135K in March to $120K in December based on the loans we track (majority of industry). December is overly affected by holidays, but fundings have also been running ~25% lower than Q1/March in past several months prior to Dec.

      • John,

        Almost all HECMs closed before December 1, 2013 were in fact Standards.. The largest total endorsements for any type of HECM product during 2013 were fixed rate Standards. In fact they were probably the majority of all endorsements last year. We should have that information from HUD in the next few months. It maybe they were also the majority of all HECMs closed in 2013 as well.

        It is a joke to expound on the negative impact of the changes in the HECM as to the issuance of HREMICs and HMBSs. How many new HECMs could even have been bundled for HREMICs and HMBSs before January 1? Few, very few, new HECMs were endorsed or could have been endorsed in 2013 or been ready for GNMA issuance.

        So the number of Standards endorsed during calendar 2013 was at least as much as in 2012, if not greater. While many industry leaders believed that HECM borrowers would switch to HECM fixed rate Savers they did not!! Once the origination of fixed rate Standard was terminated, it was not the fixed rate feature which drove the origination market but total available proceeds.

        So your rational falls short of explaining what occurred in the area of GNMA issuance. I would love to hear Joe Kelly explain what went on the secondary market last year in relation to HECMs.

      • Cynic,
        I was referring to restrictions on standard fixed rate loans that have been in place for case numbers issued since 4/1 as part of the cause for decline in UPB available for HMBS/HREMIC issuance. I wouldn’t expect the new reduced PLF HECMs to impact UPB available for HMBS/HREMIC issuance volume until 2014.

  • New View Advisors be releasing HMBS league tables shortly, but we can tell you now that HMBS issuance rose in 2013. Second, the Q4 drop in HREMIC issuance is not related to UPB, PLF cuts, or other restrictions on fixed rate loans. HREMIC volume fluctuates based on incremental profit between HMBS and HREMIC securities. If HMBS investors cannot achieve additional value through HREMIC securitization, there’s no reason to issue.

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