HREMIC issuance for 2016 was $9.86 billion, surpassing 2015’s $9.51 billion, a previous record. There were 27 transactions underwritten by five sponsors, Nomura, Bank of America Merrill Lynch, Citicorp, Barclays, and RBC. Nomura remains the #1 issuer, with $5.4 billion, 54% of their life-to-date issuance of $10.1 billion. Bank of America Merrill Lynch was second with $3.2 billion. Life-to-date BAML has issued $17.8 billion of all HREMICs, for a 40% market share. Nomura has issued 23% of all HREMICs, and Barclays 13%.
Approximately 80% of outstanding HMBS securities have been resecuritized into HREMICs, up from 77% at the end of 2016Q3. A stronger bid for the Interest-Only HREMIC classes emerged in 2015, and the seasoned HMBS pools we’ve referenced in past blogs are also contributing to the HREMIC volume uptick. The HREMIC structure, which allows issuers to create bond classes such as these “IO” securities, is increasingly the most profitable option.
HREMIC collateral consists of HMBS, which are Ginnie Mae guaranteed pass-through securities. HMBS are backed by pools of participations of HECMs, which are FHA-insured reverse mortgages. This double layer of government guarantee, combined with the relatively high coupon and favorable prepayment patterns of the underlying loans, results in very favorable execution, even when compared to other Ginnie Mae “forward mortgage” securities.
New View Advisors compiled these rankings from publicly available Ginnie Mae data.