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Reverse Mortgage Securities Production Starts Strongly in January

The production of new Home Equity Conversion Mortgage-backed securities (HMBS) totaled approximately $760 million in January as low interest rates continue to strengthen new production. Securitization of private reverse mortgage products is becoming a bigger factor overall, and HMBS production is up compared with recorded figures from January 2019. This is according to publicly available Ginnie Mae data and private sources compiled by New View Advisors.

January 2020 saw 87 new HMBS pools issued, including approximately $550 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. 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 writes in its commentary accompanying the January 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.”

The trend of new production issuance continues in an upward direction. January’s production of new, original loan pools was approximately $550 million, 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. The figure barely reached $300 million one year ago in January 2019, writes New View.

Tail pool HMBS issuances stood in January at $210 million, which is within the recent trend of tail pool issuances in the last few prior months.

Read the full commentary at New View Advisors.