Reverse mortgage securities issuance rebounded to the second-highest monthly level they have seen all year, following lackluster performance in 2014 compared to past years, according to the latest Home Equity Conversion Mortgage Backed Securities (HMBS) issuance data from Ginnie Mae, analyzed by New View Advisors.
On a monthly basis, HMBS issuance ticked up as issuers sold $690 million in new pools during October, the second-highest amount for any month this year next to January’s total of $711 million.
Though the month was up significantly compared to September’s $498 million total, issuance was down on a year-over-year basis. In October 2013, HMBS issuance totaled $761 million.
In terms of monthly pool tallies, HMBS issuance this October spanned 106 pools issued, the most ever, consisting of 59 original issuances and 47 tail pools, according to commentary from New View Advisors.
Original HMBS pools are created when a pool of HECMs insured by the Federal Housing Administration is securitized for the first time, notes New View. On the other hand, tail HMBS issuance comprises HMBS pools created from the uncertificated portions of HECMs that have already had their original HMBS issuance.
The 47 tail pools issued in October tallied $155 million, which New View notes as the highest number of tail pools issued in any month, and second-highest dollar amount.
Total HMBS outstanding is now just over $49.2 billion, up from $48.9 billion at the end of September.
As the prepayment rates of seasoned HECM loans underlying HMBS pools continue to edge up, exceeding 11.5% over the last six months, New View suggests this pattern is likely to continue.
“This trend should continue for some time, as more and more seasoned HECM loans are assigned to FHA when their unpaid balances reach 98% of the Maximum Claim Amount,” New View writes. “If issuance and interest rates stay low, overall HMBS outstanding may decline for the first time.”
Despite October’s HMBS gains, Ginnie Mae issuance is down significantly overall, with $28 billion issued in September 2014, compared to an average of $38 billion per month in fiscal year 2013.
Read the commentary from New View Advisors.
Written by Jason Oliva