Coming off a particularly hot February, issuance of HECM mortgage-backed securities (HMBS) saw a relatively weak March with issuers creating approximately $639 million in new HMBS pools, according to the latest commentary from New View Advisors.
March’s HMBS issuance fell short of both February’s $768 million and March 2015’s $660 million. The weak tally in original loan pools, however, were mitigated by a strong tail issuance totaling about $219 million.
In total, 93 pools were issued in March, consisting of only 53 tail pools and 40 original pools—the lowest issuance since April 2014, according to New View Advisors.
Original HMBS pools are created when a pool of Federal Housing Administration-insured Home Equity Conversion Mortgages (HECMs) is securitized for the first time, whereas tail issuances are HMBS pools created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance.
“Original pools are those HMBS pools backed by the first participation in a previously uncertificated HECM loan, typically a recently originated HECM loan,” writes New View Advisors in its latest market commentary for March.
Only $420 million in original HMBS pools were issued during the month, which New View Advisors noted was the lowest dollar tally since September 2014. Meanwhile, tail issuances accounted for about 34.2% of March’s total—the third-highest tail percentage ever.
Unlike February, which saw nearly $175 million in new HMBS pools with seasoned HECM collateral, no new large pools with seasoned loans padded March’s totals.
New View Advisors attributes reduced loan volume to the FHA’s Financial Assessment requirements, which took effect for all HECM case numbers assigned on or after April 27, 2015. These new rules, New View notes, have reduced monthly HMBS issuance from $874 million in May 2015.
Total outstanding HMBS is $523.823 billion, up slightly from just under $53.757 billion at the end of February.
“We estimate that this increase is composed of approximately $168 million in negative amortization, plus the $639 million in new issuance, minus about $741 million in payoffs,” writes New View Advisors.
Written by Jason Oliva