Reverse Mortgage-Backed Securities Market Shrinks for First Time

The Home Equity Conversion Mortgage-backed Securities (HMBS) market shrank for the first time, as a record level of prepayments drove total outstanding HMBS to just under $55 billion, according to the latest market commentary from New View Advisors.

HMBS issuers created 97 pools in December 2016, totaling $715 million, according to data compiled by New View Advisors from publicly available Ginnie Mae data as well as private sources. The pools were divided into 49 original pools and 48 tail pools.

Compared to the previous month, production of original new loan pools was up $515 million, an increase from November’s $504 million and roughly the same as December 2015’s totals.


December’s tail issuance was approximately $199 million, which New View Advisors recognizes as the third-lowest monthly issuance total in 2016—a year that tallied $9.187 billion in total issuance volume.

Original pools are HMBS pools backed by the first participation in a previously uncertificated HECM loan, whereas tail HMBS pools are created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance.

New View Advisors estimates that December’s change in HMBS balance was composed of approximately $173 million in negative amortization, plus the $715 million in new issuance, minus a “whopping” record $943 million in payoffs. By comparison, December 2015 payoffs totaled only about $653 million.

“Payoffs have exceeded new issuance for four months in a row,” states New View Advisors. “Payoffs figure continue to climb as more seasoned HECM loans liquidate or reach 98% of their Maximum Claim Amount. Further shrinkage in outstanding HMBS float could continue throughout 2017.”

Read the New View Advisors commentary here.

Written by Jason Oliva

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  • This is certainly not a positive sign for the industry, albeit not surprising as the dip in originations due to financial assessment is overtaken by the ‘aging out’ of older loans. I would agree with New View Advisors re a continuation of this trend into 2017 as the industry seeks ways to establish the HECM as a main-stream financial tool.


      Thanks for the clarification. Yet this period is abnormal due to assignment of so many fixed rate Standard HECMs with case numbers assigned before 4/1/2013. This bunching up in assignments of these fixed rate Standard HECMs is due to the requirement that the related proceeds not taken at closing will not be available to the borrower so that almost all borrowers who took out those HECMs in fact took all proceeds available to them at closing.

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