Reverse Mortgage Securities Market Sets Record in December

Issuers of reverse mortgage-backed securities (HMBS) had a record end to 2017, logging the highest monthly issuance total in almost eight years.

HMBS firms generated 106 loan pools for a total of $1.35 billion, outpacing $1 billion in payoffs — the first time in 15 months that issuance exceeded payouts, according to the most recent analysis from New View Advisors. Those 106 loan pools were divided evenly between 53 original and 53 “tail” pools.

The New York City-based advisory and analysis firm identified the pre-October 2 spike in applicants seeking to lock in higher principal limit factors as a key reason behind the solid production of new loan pools.

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“Production of original new loan pools was a strong $748 million, reflecting the mad rush of origination at the end of FY 2017,” New View observed.

December’s total of $1.02 billion in payoffs was still historically strong, ranking as the sixth-highest monthly figure of all time.

“Total HMBS float has been stuck between $54 billion and $56 billion for nearly two years, though this may change in 2018 as the new principal limit factors (PLFs) start to reduce origination volume,” New View wrote.

Quarterly numbers also strong

On a quarterly basis, the industry generated $2.1 billion in new HMBS — excluding tails — during the final part of 2017.

“4Q ’17 was better than 3Q, and as an industry we have improved consistently quarter after quarter,” an analysis from the St. Johns, Fla.-based Baseline Reverse noted.

Leading the charge, according to Baseline, was industry leader American Advisors Group, which logged $158.6 million in new production for 21.2% market share in December. Finance of America Reverse grabbed 20.5% in the month, with $153.4 million in new issuance, followed by Reverse Mortgage Funding, Ocwen, and LiveWell.

Baseline’s numbers also show a distinct post-October surge, with $754 million in new production in November and $747 million in December — as compared to $610 million in October.

Written by Alex Spanko