Reverse Mortgage Securities Issuance Outpaces 2014, But Future Dip Likely

Home Equity Conversion Mortgage-Backed Securities (HMBS) issuance hit a new high in April, more than doubling year over year, but new industry regulations could significantly impact those numbers in the long term, according to data compiled and analyzed by New View Advisors. 

After a strong first quarter that saw more than $2 billion in securities issuance, HMBS issuers created $798 million in new HMBS pools in April 2015 — the largest HMBS issuance since December 2013, up from $660 million in March, and double April 2014’s “paltry” $396 million, New View writes in its commentary. 

Thus far in 2015, HMBS issuance is averaging just over $700 million per month, well above last year’s $550 million monthly average.

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In April, 113 pools were issued, consisting of 63 original issuances and 50 tail pools. Tail issuances —  HMBS pools created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance — accounted for $155 million, or about 19% of April’s total.

However, the good times might not last much longer, as the reverse mortgage industry has seen a marked shift in its operations following HECM program changes that went into effect in late April. 

“New regulations may prevent HMBS issuers from maintaining this healthy clip,” New View writes. “FHA’s Financial Assessment requirements for newly originated HECM loans will certainly reduce loan volume for the foreseeable future. Given the lag between loan origination and securitization, it will take a few months before we know the full impact.”

Total outstanding HMBS is $50.9 billion, up from $50.7 billion at the end of March. If monthly issuance falls back below $500 million, total HMBS outstanding could shrink for the first time.

Read New View’s latest commentary here

Written by Emily Study

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