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Record Reverse Mortgage Loan Pools Push September HMBS to $836 Million

Driven by the production of new reverse mortgages, issuers of Home Equity Conversion Mortgage-backed Securities (HMBS) created a record number 119 loan pools in September, bringing total HMBS issuance to the third-highest monthly dollar volume this year, according to the latest market commentary from New View Advisors.

Production of original new loan pools grew to $623 million in September, up from $467 million in August. Compared to the previous month, September’s new original and unseasoned pool production increased 34%.

While September’s total HMBS issuance of $836 million was 16% lower than August’s $996 million, New View Advisors notes that August’s high totals were augmented by $321 million of new pools backed by “very seasoned” loans. On a year-over-year basis, HMBS issuance in September 2016 was up 23% from September 2015’s $680 million.

Among the record 119 pools, 56 were tail pools and 63 were original pools, which are those HMBS pools backed by the first participation in a previously uncertificated HECM loan, typically a recently originated HECM.

The original pool totals for September represent a “breakout” from the typical post-Financial Assessment range of $400-$500 million per month, according to New View Advisors, which compiled its commentary data from publicly available Ginnie Mae data, as well as private sources.

Tail issuances, which strengthened to $212 million, are HMBS pools created from the uncertificated portions of HECMs that have already had their original HMBS issuance.

“September’s tail issuance was typical for HMBS tail issuance in 2016,” writes New View Advisors in its commentary. “No original pools backed by highly seasoned HECM loans were issued in September.”

Total outstanding HMBS grew to $54.9 billion in September, up about $157 million from August.

“We estimate that September HMBS was composed of approximately $170 million in negative amortization, plus the $836 million in new issuance, minus a record $850 million in payoffs,” writes New View Advisors. “Payoffs figure to continue to climb as more seasoned HECM loans liquidate or reach 98% of their Maximum Claim Amount.”

Read the full New View Advisors commentary here.

Written by Jason Oliva