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Seasoned Reverse Mortgages Push August HMBS to 2016 High

Issuers of Home Equity Conversion Mortgage-backed securities (HMBS) created approximately $996 million in new HMBS pools during August 2016, marking the highest total seen this year, according to the latest commentary from New View Advisors.

On a monthly basis, August’s HMBS issuance total grew 41% from July’s $704 million, and 36% from $730 million reported in August 2015, according to the New View Advisors analysis, which is derived from publicly available Ginnie Mae data as well as private sources.

Issuers sold 96 pools in August 2016, divided into 50 original pools and 46 tail pools. Original pools are HMBS pools backed by a first participation in a previously uncertificated HECM loan, typically a recently originated HECM.

While August’s original issuance totals were typical of the post-Financial Assessment HECM origination market, original loan pools backed by highly seasoned HECM loans drove HMBS issuance to its highest monthly total so far this year.

Compared to the previous month, production of original new loan pools fell to $497 million in August, from $497 million in July. However, there were $321 million of original pools backed by seasoned HECMs during the month. The largest pool was backed by HECM loans averaging over 10 years old, notes New View Advisors.

Original HMBS pools are created when a pool of FHA-insured HECMs is securitized for the first time, whereas Tail HMBS issuances are HMBS pools created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance.

Tail issuance strengthened to approximately $209 million, which New View Advisors notes is typical of this year’s production.

“This appears to be the new issuance range for the industry: new production between $400 – $500 million per month, tail issuance of just above $200 million per month, plus the occasional seasoned loan HMBS securitization,” writes New View Advisors in its August commentary.

Total outstanding HMBS ticked up to $54.7 billion, up $325 million from July.

August HMBS comprised approximately $169 million in negative amortization, plus the $996 million in new issuance, minus a record $839 million in payoffs, according to New View Advisors’ estimations.

“Payoffs figure to climb still higher as more seasoned HECM loans liquidate or reach 98% of their Maximum Claim Amount,” writes New View Advisors.

Read the latest New View Advisors commentary here.

Written by Jason Oliva