HMBS issuers sold $628 million in new pools during November 2014, the third highest monthly issuance this year, but down from last month’s $690 million. This brings the year-to-date total to just under $6 billion. It is all but certain that 2014 will be the lowest full year of issuance since 2008, when HMBS was a fledgling program that had yet to be adopted by most market participants. 91 pools were issued last month, the third month this year with that exact tally. These 91 pools consisted of 49 original issuances and 42 tail pools. By comparison, HMBS issuance totaled $878 million in November 2013, and averaged nearly $800 million per month during 2013. Thus far in 2014, HMBS issuance is averaging only $543 million per month.
Total HMBS outstanding is now just over $49.5 billion, up from $49.2 billion at the end of September. HMBS float increases with new issuance and negative amortization and decreases with payoffs of underlying HECMs. The prepayment rates of seasoned HECM loans underlying HMBS pools continue to edge up, exceeding 11.8% over the last 6 months. This trend should continue for some time, as more and more seasoned HECM loans are put back to FHA when their unpaid balances reach 98% of the Maximum Claim Amount. If issuance and interest rates stay low, overall HMBS outstanding may decline for the first time.
Original HMBS pools are created when a pool of FHA-insured Home Equity Conversion Mortgages (“HECMs”) is securitized for the first time. Tail HMBS issuances are HMBS pools created from the Uncertificated Portions of HECMs that have already had their original HMBS issuance. The 42 Tail Issuances totaled $130 million in November, the highest number of tail pools issued in any month, and the second highest dollar amount.
Newly originated loans comprise a large majority of HMBS issuance in any given month. As a result, HMBS issuance is a pretty good barometer of recent HECM production. Beginning with FY 2014, HECM principal limits were cut once again, and FHA imposed new restrictions on the initial draw allowed for certain borrowers. The resulting lower HECM production inevitably reduces HMBS production. However, beginning August 2014, FHA published a new table that raised principal limits for HECMs at current market interest rates.
Overall Ginnie Mae issuance is down significantly, with $28 billion issued in November 2014, compared to an average of $38 billion per month in FY 2013. (These figures include both forward and reverse, Ginnie Mae I and Ginnie Mae II securities.)
New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.