Reverse Mortgage Securities Issuance Drops 30% to Hit Five-Year Low

Reverse mortgage securities issuance hit a five-year low in February 2014, with issuers creating $493.6 million in new reverse mortgage-backed securities pools. This marks the smallest issuance since May 2009, according to New View Advisors.

By dollar amount, February’s HMBS issuance is down more than 30% from January’s $710 million and nearly 29% from the $695 million issued in February 2013. Monthly HECM mortgage-backed securities (HMBS) issuance averaged nearly $800 million throughout 2013, New View notes. 

The month’s issuance included 76 pools: 44 original issuances and 32 tail pools. 

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“HMBS pools can be formed using seasoned collateral, but the healthy premiums of HMBS drive the vast majority of new HECM production quickly into HMBS,” says New View in its monthly commentary. “Since January 2013, at least 75% of every month’s HMBS issuance has consisted of participations from HECM loans aged 3 months or less. As such, HMBS issuance is a good barometer for recent HECM production.”

February 2014 is the first month where original HMBS issuances “almost entirely” reflect reverse mortgages originated in fiscal year 2014. Beginning in fiscal year 2014, reverse mortgage principal limits were reduced and the HECM program saw new restrictions on the amount of loan proceeds borrowers can access up front.

“The resulting lower HECM production inevitably reduces HMBS production,” New View says, adding that the short month of February was a large contributing factor for the five-year low. 

Ginnie Mae issuance is down “significantly” across the board, with $21 billion issued in February 2014 compared to an average of $38 billion per month in fiscal year 2013, including both forward- and reverse mortgage-backed securities. 

“Day count differences account for nearly all the $16 million decline in tail issuance [for HMBS] from January to February,” the commentary says. “However, with a still robust secondary market, and with other previous February issuances at least 40% higher, seasonality is not a factor.” 

Access New View Advisors’ commentary on February 2014 HMBS data.

Written by Alyssa Gerace

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  • Of course the new issuance numbers are worse when compared to 2009 figures since tails accounted for so little of 2009 volume.

    February numbers indicate how poorly the modified Saver is doing. Its higher upfront cost and first year disbursements limitation make the modified Saver a far less useful and more expensive product. Hopefully, HUD will quickly find that it can adjust the modified Saver closer to the original Saver with a less restrictive first year disbursement rule and far less upfront MIP.

    While many in the industry resent such frank talk about the “new” and somehow improved HECM, double talk and less than accurate comparisons are worse for the long-term reputation of the industry than a frank and detached discussion of the modified Saver.

    What occurred on September 30, 2013 was similar to what occurred on April 1, 2013 when fixed rate Standards were eliminated in that all Standards were eliminated; however, the differences on September 30, 2013 have been devastating on lender revenues.

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