HMBS Supply Reaches New 5-Year Low in April

After falling short in March, the supply of Home Equity Conversion Mortgage-Backed Securities (HMBS) hit a new five-year low in April, according to data compiled by Ginnie Mae and other analysis from New View Advisors.

Issuers created only $396 million in new HMBS pools last month, 22% less than the approximately $510 million recorded during the previous month.

April represented the smallest monthly HMBS issuance since May 2009, according to New View Advisors’ analysis. In April, 65 pools were issued consisting of 31 original issuances and 34 tail pools.

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When compared on a year-over-year basis, HMBS issuance totaled $972 million in April 2013, and averaged nearly $800 million per month during 2013.

HMBS issuance is a “good barometer” of recent HECM production, New View notes, Federal Housing Administration (FHA) program changes to the HECM are having an impact on lagging production.

“Beginning with FY 2014, HECM principal limits were cut once again, and FHA imposed new restrictions on the initial draw allowed for certain borrowers,” stated New View. “The resulting lower HECM production inevitably reduces HMBS production.”

Looking at the bigger picture, Ginnie Mae issuance is down significantly when comparing March’s levels year-over-year, down to $17.8 billion issued during the month in 2014 compared to $39.9 billion in March 2013.

Access the New View Advisors commentary and data.

Written by Jason Oliva