Despite reaching the lowest level since March, issuance of Home Equity Conversion Mortgage mortgage-backed securities (HMBS) is far outpacing last year’s numbers, according to the latest commentary from New View Advisors.
The $680 million in new HMBS pools created by issuers in September was the lowest HMBS issuance since March, and was also down from the $730 million created in August, according to New View’s commentary on publicly available Ginnie Mae data. September 2015 HMBS issuance, however, was higher than its year-ago level of $498 million in September 2014.
Even with the recent monthly decline in September, HMBS issuance in 2015 year-to-date exceeds $6.7 billion, surpassing 2014’s full year total of $6.6 billion. Thus far in 2015, HMBS issuance is averaging over $749 million per month, which New View Advisors notes is “well above” the $550 million monthly average in 2014.
During the month, 113 pools were issued consisting of 57 original issuances and 56 tail pools.
Original HMBS pools are created when a pool of HECMs is securitized for the first time, whereas tail HMBS issuances are HMBS pools created from Uncertificated Portions of HECMs that have already had their original HMBS issuance. Because newly originated loans comprise a large majority of HMBS issuance in any given month, New View Advisors indicates HMBS issuance is a good barometer of recent HECM production.
September’s tail pool tally of $210 million is an “all-time record,” according to New View Advisors, which notes that never before has tail issuance topped $200 million.
“Some of this increase is no doubt due to the expiration of the draw restriction for many loans originated in 2014,” New View Advisors writes in its commentary of the data. “After one year, the limit on available line of credit expires for many HECMs, significantly increasing the draw rate for these loans.”
Meanwhile, original pools backed by new loans totaled $470 million, the lowest issuance amount since September 2014.
“FHA’s new Financial Assessment requirements for newly originated HECM loans are the main driver for the reduced loan volume, which has reduced HMBS issuance from a 2015 peak of $874 million in May,” writes New View Advisors. “The large majority of the loans in these original pools are only one or two months old.”
Read the New View Advisors HMBS commentary.
Written by Jason Oliva