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April HMBS Tops $775 Million, Remains Below Year-Ago Level

Issuance of HECM mortgage-backed securities (HMBS) rose in April following a relatively weak March, but still remain lower than year-ago levels, according to the latest market commentary from New View Advisors.

HMBS issuers created approximately $775 million in new HMBS pools during April 2016, according to recent data compiled by New View Advisors from publicly available Ginnie Mae data as well as private sources. Although April’s HMBS issuance total exceeded March’s $639 million, it remained below the $798 million issued in April 2015.

Last month, issuers sold 94 pools, which were split evenly into 47 original pools and 47 tail pools. Original pools are HMBS pools backed by the first participation in a previously uncertificated HECM loan, typically a recently originated HECM loan.

“Newly originated loans comprise a large majority of HMBS issuance in any given month,” writes New View Advisors in its market commentary report posted Monday. “As a result, HMBS issuance is a good barometer of recent HECM production.”

Original HMBS pools are created when a pool of Federal Housing Administration-insured Home Equity Conversion Mortgages 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.

During the month, only $455 million in original new production loan pools were issued, however, New View Advisors notes this was an improvement over March’s $420 million—the lowest tally since September 2014. A $106 million seasoned pool helped pad the April’s totals, backed by 10-year-old CMT loans.

Of April’s total, tail HMBS issuances accounted for approximately $214 million—the fourth highest monthly tail issuance on record, notes New View Advisors.

Financial Assessment requirements for HECM loans originated since April 27 2015 continue to be the main driver for reduced loan volume, which has reduced monthly HMBS issuance from $874 million in May 2015, according to New View Advisors data.

As of April 2016, total outstanding HMBS is approximately $54 billion, up from just under $53.8 billion at the end of March.

“We estimate that this increase is composed of approximately $168 million in negative amortization, plus the $775 million in new issuance, minus a record $753 million in payoffs,” New View Advisors stated in its market commentary.

Read the New View Advisors HMBS commentary for April.

Written by Jason Oliva