Reverse Mortgage Securities Issuance Rises Pending Short-Term Decline

Despite uncertain production figures to date following the most recent change in reverse mortgages—the financial assessment—Home Equity Conversion Mortgage-Backed Security (HMBS) issuance remained strong in June.

Issuers produced $845 million in HMBS product during the month; a total that rivals only May for the greatest monthly issuance since November 2013, according to data compiled by New View Advisors. Year over year, June issuance far surpassed its previous-year total of $439 million.

Recently, issuer rankings have shifted, with American Advisors Group now holding the top spot for issuance by volume, outpacing Reverse Mortgage Solutions for the first time in the first half of this year.

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HMBS issuance will likely fall in the short term, New View writes in its monthly commentary on the market.

“…FHA’s Financial Assessment requirements for new HECM loans will certainly reduce new loan origination, at least in the short run,” New View writes. “We will soon see the impact of Financial Assessment on HMBS supply.”

Total HMBS outstanding is around $51.7 billion, New View writes, an uptick from the end of May comprising negative amortization, new issuance and payoffs.

“If monthly issuance falls back below $400 million, total HMBS outstanding could shrink for the first time,” New View says, noting that payoffs are rising steadily as loan balances are reading 98% of their max claim amounts and are being assigned to the Department of Housing and Urban Development.

Read the New View Commentary.

Editor’s note: a previous version of this article stated incorrectly that the total outstanding balance of HMBS was $51.7 billion as of the end of April. The balance is as of May. 

Written by Elizabeth Ecker

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