Issuers of HECM mortgage-backed securities (HMBS) created approximately $694 million in new HMBS pools in June, a total that is substantially less than the previous month and year-ago issuance, according to the latest market commentary from New View Advisors.
Although June HMBS issuance was lower than the $857 million recorded in May and the $845 million reported in June 2015, May was bolstered by highly seasoned original issuance and June 2015 numbers were inflated by the pre-Financial Assessment origination rush, noted New View Advisors, which compiled its analysis using publicly available Ginnie Mae data as well as private sources.
In June 2016, HMBS issuers sold 104 pools divided into 49 original pools and 55 tail pools. Production of original new loan pools matched the previous month’s $449 million total. Meanwhile, no seasoned original pools were issued in June.
Original HMBS pools are created when a pool of Federal Housing Administration-insured Home Equity Conversion Mortgages (HECMs) is securitized for the first time. Tail HMBS issuances are those HMBS pools created from Uncertificated Portions of HECMs that have already had their original HMBS issuance.
Tail issuances grew to approximately $244 million in June, up from May’s total of $211 million.
“This appears to be the new issuance range for the industry: new production between $400-$500 million per month, tail issuance of just above $200 million per month, plus the occasional seasoned loan HMBS securitization,” writes New View Advisors in its commentary.
Total outstanding HMBS as of June remains at about $54.3 billion, up only $29 million from May—the smallest increase in recent years, according to New View Advisors.
New View Advisors estimates that June HMBS comprised approximately $169 million in negative amortization, plus the $694 million in new issuance, minus a record $834 million in payoffs.
“Payoffs figure to climb still higher as more seasoned HECM loans liquidate or reach the 98% of Maximum Claim Amount threshold,” writes New View Advisors.
Read the New View Advisors commentary.
Written by Jason Oliva