HMBS Issuers Start New Year Strong

HMBS issuers turned in a strong January on the backs of pools both new and seasoned.

The production of new home equity conversion mortgage backed securities totaled $525 million in January 2016, according to a February report from New View Advisors LLC — a gain of $10 million from the previous month, and a jump of $56 million from the total in January 2016.

New View reported a total of 57 new pools and 64 “tail pools,” or HMBS issuances created from uncertificated portions of HECMs associated with existing HMBS. Lenders issued $344 million worth of these “tails” in January 2017, the third largest monthly total of all time, according to New View.

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Michael McCully, a partner at the New York City-based financial services firm, also called out the high number of HMBS payoffs in an interview with RMD: Though the January figure declined after a record in December 2016, McCully noted that a glut of fixed-rate loans from the years preceding more stringent HECM regulations — including 2009 to 2011, which McCully called out as key years for origination volume — are increasingly maturing and seeing reassignment to HUD.

“We’re seeing the rabbit going through the snake,” McCully said of this period. “That will normalize over time.”

New View’s report also noted that payoffs have exceeded new HMBS issuances for five consecutive months through January.

Written by Alex Spanko

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  • Yet it was not until fiscal 2010 that we really began to see any substantial percentage of endorsements coming from fixed rate HECMs. For the next three and one-half years fixed rate dominated our endorsements. While we are beginning to see fixed rate HECMs go into assignment, this pace will continue and should somewhat increase for at least eight years.

    What does this mean? We need more HECM closings. No matter how it is covered over and built up, the situation in the industry as to originations right now is at best poor. This will continue unless originations rise at least significantly. Numbers count, especially now.

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