Ginnie Mae Reverse Mortgage Issuance Reaches New Normal in Post-FA Era

After a “record-smashing” November, issuance of Ginnie Mae Home Equity Conversion Mortgage mortgage-backed securities (HMBS) normalized in December as the HMBS market continues adjusting to the post-Financial Assessment era, according to the latest commentary from New View Advisors.

Issuers created approximately $685 million in new HMBS pools last month, substantially less than November’s $1.2 billion total. Without any large seasoned pools, New View Advisors notes HMBS reverted to what is now a “more usual” month of issuance: $525 million in original loan pools and tail issuance of $170 million.

December’s issuance breakdown comprised of 92 total pools, which consisted of 48 original issuances and 44 tail pools. 

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Original HMBS pools are created when a pool of Federal Housing Administration-insured HECMs is securitized for the first time. Tail HMBS issuances, on the other hand, are HMBS pools created from the uncertificated portions of previously securitized HECMs. 

“Newly originated loans usually comprise a large majority of HMBS issuance in any given month,” writes New View Advisors in its latest market commentary. “As a result, HMBS issuance is a good barometer of recent HECM production.”

December’s numbers brought total 2015 issuance to approximately $9.5 billion. Considerably higher than the previous year’s $6.6 billion tally, this $2.9 billion increase in 2015 consisted of a $1 billion growth in tail issuance, a $0.3 billion increase in seasoned original pool issuance, and an “encouraging” $1.6 billion increase in HMBS issues backed by pools of new loans, according to New View Advisors’ data, which is compiled from publicly available Ginnie Mae data as well as private sources. 

Through December, total outstanding HMBS is about $53.3 billion, an increase of only $58 million from the end of November. 

“We estimate this small increase is composed of approximately $162 million in negative amortization, plus the $685 million in new issuance, minus a record $789 million in payoffs,” writes New View Advisors. 

Payoffs, New View Advisors notes, are trending higher, driven primarily by assignments to the Department of Housing and Urban Development of seasoned HECM loans whose loan balances have reached 98% of their Maximum Claim Amount. 

“Total HMBS float could soon shrink for the first time as early as this month,” writes New View Advisors. 

Meanwhile, the supply of outstanding fixed-rate HMBS is shrinking rapidly, falling approximately $200 million from the end of November to $29.1 billion at the end of 2015. This year-end figure represents an almost $2.5 billion decline from its peak of about $31.5 billion in mid-2014, according to New View Advisors’ analysis. 

During 2015, fixed-rate issuance accounted for only 19% of total issuance, down from 32.1% in 2014.

Read the New View Advisors commentary.

Written by Jason Oliva

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  • One thing that is disturbing in this report is that total outstanding balances due on securitized HECMs are now facing reduction. That is cause for great concern despite the continuing great news on tails. The question is when will existing investors begin withdrawing their interest in our product due to the low volume of new originations. If 2016 is not at least 60,000 endorsements, our standing as an alternative investment source may start going into reverse.

    As to reductions, it has been expected that there would be the start of an avalanche of fixed rate HECM Standards and fixed rate HECMs with case numbers assigned before 10/4/2010 being assigned to HUD beginning sometime in late 2015 or early 2016. It is expected that all of this cohort will be either assigned or terminated by the first calendar quarter of 2022; thus this group of problematic will no longer be subject to projection analysis by the HECM independent actuaries.

    While it is clear what the impact of termination losses before assignment will be on the MMI Fund, it is unclear and translucent what impact (if any) losses at termination but after assignment will have on the MMI Fund. At present, some of us are researching this matter but as of yet there is nothing to report.

    Even though it seems everything in the world has been discussed on the MMI Fund at least one subject has yet to be fully disclosed, where does the termination loss on HECMs previously accounted for by the MMI Fund get recorded and what happens with the MIP which was collected before assignment (and after assignment, if any) end up. The tale may not be what many think it is.

  • Interesting comments , I was enlightened by the insight , Does someone know if my assistant might be able to get access to a template IRS 1040 – Schedule C form to type on ?

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