Just as endorsements for Home Equity Conversion Mortgages (HECMs) began 2016 with a sluggish start, January carried a similar tale for HECM mortgage backed securities (HMBS) issuers, according to the latest market commentary from New View Advisors.
HMBS issues began 2016 by issuing only $651 million in new HMBS during January, down from December’s $685 million and January 2015’s $712 million, notes New View Advisors, which complies its HMBS data from publicly available Ginnie Mae data as well as private sources.
January’s issuance, which included $468 million in original loan pools—the lowest since September 2014—and tail issuance of $182 million, reflects the “new normal” of the HECM program post-Financial Assessment, writes New View Advisors. In total, 96 pools were issued in January, consisting of 45 original issuances and 51 tail pools.
Original HMBS pools are created when a pool of FHA-insured HECMs is securitized for the first time, whereas tail HMBS issuances are HMBS pools created from the uncertificated portions of previously securitized HECMs. Since newly originated loans usually comprise a large majority of HMBS issuance in any given month, New View Advisors says HMBS issuance is a good barometer of recent HECM production.
Fixed-rate HMBS accounted for 16% of January’s issuance, compared to 19% for all of 2015, and 32% in 2014.
Also during January, total outstanding HMBS increased to about $53.4 billion, despite payoffs exceeding new issuance for the second consecutive month.
“We estimate that this relatively small $120 million increase is composed of approximately $163 million in negative amortization, plus the $651 million in new issuance, minus $694 million in payoffs,” writes New View Advisors. “Payoffs increased last year, driven primarily by put-backs to HUD of seasoned HECM loans whose loan balances have reached 98% of their Maximum Claim Amount.”
Read the New View Advisors commentary.
Written by Jason Oliva