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Reverse Mortgage Securities Production Dips Slightly in February

The production of new Home Equity Conversion Mortgage-backed securities (HMBS) totaled approximately $707 million in February as low interest rates continue to strengthen new production, though this figure is lower than the $760 million total observed in January. This is according to publicly available Ginnie Mae data and private sources compiled by New View Advisors.

February 2020 saw 81 new HMBS pools issued, including approximately $501 million of new, unseasoned first participation HECM pools. This continues a strong upward trend according to New View, but also highlights the general headwinds facing the reverse mortgage industry at the moment. No new highly seasoned pools were issued in February.

Changes to principal limit factors (PLFs) in October of 2017 became active at the beginning of 2018’s fiscal year, though 2019’s new production of HECM and HMBS began to recover and reach its long-term average range of $500 – $600 million once more by the end of the year, says New View.

Total figures for the HMBS market in 2019 appeared lower than figures recorded in 2018, but there are other factors affecting the data, according to New View.

“The HMBS market totaled about $8.3 billion for calendar year 2019, down from $9.6 billion in 2018 and $10.5 billion in 2017,” New View reiterates in its commentary accompanying the February data. “However, securitization of private reverse mortgages is a much bigger factor now. As a result, we estimate that the total issuance of reverse mortgage securities backed by new collateral in 2019 was about the same as 2018.”

While February production is reduced compared with the prior month, the trend of new production issuance has generally been continuing in an upward direction over the past several months. February’s production of new, original loan pools was approximately $501 million, while January’s sat at $550 million, which was up from other recent figures. The production of original new loan pools stood at $484 million in December; $506 million in November; $426 million in October; and $393 million in September.

“Adjusted for day count, February 2020 continues the strong issuance pace of January 2020,” writes New View.

Tail pool HMBS issuances stood in February at $206 million, also down slightly from January but still within the recent trend of tail pool issuances in the last few prior months.

Read the full commentary at New View Advisors.