Reverse Mortgage Securities Issuance Tops $2B in First Quarter

Reverse mortgage backed securities issuance has continued on a steady pace in 2015, totaling more than $2 billion in the first quarter, according to data compiled and analyzed by New View Advisors.

The total includes a recent relatively strong month for issuance, March 2015, during which HMBS players issued more than $660 in new pools, New View notes in commentary published this week. Total issuance in the first quarter is up 17% over the same period in 2014, when issuers totaled $1.7 billion in new pools.

Certain factors have boosted the landscape for originators, and issuers in turn, though some will not last indefinitely.

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“Issuers continue to benefit from both the higher [principal limit factors] enacted in August 2014 and the relatively large borrower draws now rolling in as many loans reach their 13th month, when draw restrictions expire,” New View writes.

The Department of Housing and Urban Development changed principal limit factors in August along with new non-borrowing spouse rules, leading to higher PLFs for borrowers on the older end of the spectrum under current interest rates.

Given the relationship between new loans originated and HMBS issuance, the tally is a measure of industry production, New View says. Other industry analysis is based on trailing metrics such as application and endorsement data released by HUD.

“Newly originated loans comprise a large majority of HMBS issuance in any given month, and a very large majority of current production HECM loans are securitized into HMBS,” New View writes in its commentary. “As a result, HMBS issuance is a good barometer of recent HECM production.”

Read New View’s commentary.

Written by Elizabeth Ecker

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  • I see this as good news. I feel another reason is the amount of business AAG is doing, they are breaking all records.

    However, I would agree that the higher principle limit factors and amount of draws are increasing. Also as pointed out the 12 month period hold back due to the 60% rule is making its impact through the remaining funds being eligible to draw upon.

    John A. Smaldone

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