Issuance of Home Equity Conversion Mortgage (HECM) mortgage-backed securities (HMBS) started 2015 on a strong note, marking the highest tally seen since December 2013, according to the most recent commentary from New View Advisors on publicly-available Ginnie Mae data.
HMBS issues sold $712 million in new pools during January 2015, a 9.7% increase from December 2014’s total of $649 million—marking the fourth straight month where issuance exceeded $600 million.
“With interest rates still low and financial assessment postponed, we expect this trend to continue,” said New View in its commentary.
In January, tail issuance accounted for more than 23% of the month’s total dollar amount and half of the 106 pools that were issued.
“Issuers are benefitting from both the higher PLFs enacted in August 2014 and relatively large borrower draws, as loans originated with utilization caps reach their 13th month, when draw restrictions expire,” New View said.
The typical product mix reflected by the Federal Housing Administration’s program changes are further illustrated when looking at fixed-rate issuance, which comprised only 25% of total HMBS issuance in January 2015.
Since newly originated loans comprise a large majority of HMBS issuance in any given month, and a “very large majority” of current HECM production are securitized into HMBS, New View suggests HMBS issuance is a good barometer of recent HECM production.
When looking at broader Ginnie Mae issuance overall—including forward, reverse, Ginnie Mae I and II securities—issuance is down significantly with $313 billion issued in 2014, compared to just over $417 billion in 2013.
View the New View Advisors commentary.
Written by Jason Oliva