HMBS September 2019: Back to School Special

HMBS issuance totaled nearly $610 million in September, as lower rates continued to strengthen new production. 83 pools were issued in September, including about $393 million of new unseasoned HECM first participation pools, the highest monthly total for new production this year. For comparison, HMBS issuers sold 104 pools totaling $588 million in September 2018.

However, reverse mortgage lenders still face reduced volume, primarily due to the new lower PLFs for Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of fiscal year 2018. Even with this month’s issuance, the HMBS market is on pace to issue less than $8 billion in calendar 2019. HMBS issuance totaled $9.6 billion in 2018 and $10.5 billion in 2017.

September’s production of original new loan pools was about $393 million, compared to $390 million in August, $321 million in July, $331 million in June, $325 million in May, $300 million in April, $277 million in March, $274 in February, and $304 million in January. Last month’s tail pool issuances totaled $217 million, on the low end of the range of recent tail issuance. As we predicted two months ago, the industry is likely seeing the benefit of lower interest rates helping new origination volume.

September 2019 issuance divided into 28 First-Participation or Original pools and 55 tail pools. Original pools are those HMBS pools backed by first participations in previously uncertificated HECM loans. Tail HMBS issuances are HMBS pools consisting of subsequent participations. Tails are not from new loans, but they do represent new amounts lent. Tail HMBS issuance can generate profits for years, helping HMBS issuers during challenging times.

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


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