Reverse Mortgage Securities “Tails” Boost HMBS Issuance

Reverse mortgage securities issuance comprising new loan pools is tapering slightly into the second half of 2015, echoing an expected decline due to the implementation of reverse mortgage Financial Assessment in April.

However, while new loan pools are down $35 million from June to $809 million in new issuance in July, “tail” issuance—or that comprising partial, uncertified loans that have already been counted as original issuance—is on the rise, according to data compiled an analyzed by New View Advisors this week.

It’s a “Tail of Two Securities,” New View writes in commentary around July’s HECM Mortgage Backed Securities issuance data.

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“HMBS issuance was strong overall in July 2015, with record “Tail” issuance partially compensating for a decline in origination and securitization of HMBS backed by new HECM loans,” New View writes.

Issuance has declined slightly month over month, but on a year-over-year basis, has increased, from an average monthly total of $507 million to a 2015 monthly average of $762 million.

The original HMBS tally is a good indicator of HECM volume, New View says, explaining the decline as a result of financial assessment, which was to be expected and has been seen both anecdotally as well as in endorsement volume in the first months following the new rule’s implementation.

New View also tracks total outstanding HMBS, reporting the current total is just under $52 billion, up from $51.7 billion at June’s month-end.

Read the full New View commentary.

Written by Elizabeth Ecker

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  • Insurance companies would love to be in the situation that FHA mortgagees find themselves in, growing residuals with no residual commissions to pay their sales forces.

    When the vast majority of HECMs were fixed rate less than three years ago and there was no first year disbursements limitation just a little less than two years ago, why wouldn’t tails be up, way up?

    Tails are a FHA mortgagee’s dream come true. First the CFPB did a huge favor for lenders by attacking originator compensation, as reverse mortgage lenders finally had a reason to create a better compensation model for lenders, HUD further favored lenders with first year disbursements limitation since tails were all but mandated.

    Now FHA mortgagee’s have a source of revenue for which they have no commissions to pay on. Tails’ premiums, the treasure store of a HECM mortgagee.

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