HMBS October 2016: No October Surprise

HMBS issuers created 100 pools in October, keeping pace with September and again aided by seasoned pool issuance. Production of original new loan pools fell to $487 million, down sharply from September’s $624 million but in line with the $467 million issued in August. Issuance totaled approximately $832 million in October, the fourth highest monthly dollar volume this year, down just slightly from the September’s $836 million tally. The pool tally divided into 47 original pools and 53 tail pools. October’s HMBS issuance included two highly seasoned original pools totaling $136 million.

Original pools are those HMBS pools backed by the first participation in a previously uncertificated HECM loan. Tail HMBS issuances are HMBS pools consisting of subsequent participations. In other words, tail pools are created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance. October’s tail issuance was about $209 million, typical of this year’s production.

Total outstanding HMBS ticked up to just under $55 billion, up about $111 million from September. We estimate that October HMBS was composed of approximately $171 million in negative amortization, plus the $832 million in new issuance, minus a record $891 million in payoffs. Payoffs have exceeded new issuance in 4 of the last 5 months. Payoffs continue to climb as more seasoned HECM loans liquidate or reach 98% of their Maximum Claim Amount.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

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