HMBS September 2023: HMBS Schooled By Higher Rates

The HMBS new issue market improved slightly from August. HECM Mortgage-Backed Securities (“HMBS”) issuance totaled $638 million in September, up from August’s $572 million. 103 pools were issued, low by historical standards. The increase is primarily the result of one issuer pooling four months of production.

FAR was the top issuer in September, with $197 million; Longbridge was the only other issuer to top $100 million. Ginnie Mae/RMF (aka “Issuer 42”) again issued no HMBS pools.

HMBS issuance set a record in 2022, with nearly $14 billion issued. HMBS issuers will not come anywhere near those numbers in 2023; the first three quarters totaled only about $4.9 billion.

September’s original (first participation) production of $445 million was up from August’s $391 million. The increase in first-participation issuance was primarily a function of Guild Mortgage Company, the purchaser of Cherry Creek Mortgage, issuing $67 million in first participation pools. Cherry Creek has not issued pools since May; the $67 million represents four months of loan origination – squashing hopes September issuance represents a market turnaround. September issuance was weak by historical standards, about two-thirds of September 2022’s $966 million in new issuance.

The 103 pools issued in September consisted of 26 first-participation or original pools and 77 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. Last month’s tail pool issuances totaled $193 million, which remains below the typical range.

Notable in the September HMBS issuance data are the 25 pools with aggregate pool size less than $1 million. Issuers are taking advantage of Ginnie Mae’s provision to issue pools as small as $250,000. This represents $15.6 million of UPB that would not otherwise have been issued in September. Ginnie Mae just issued APM 23-11 which now allows participations from the same loan to be pooled more than once in the same month. Both of these provisions are designed to provide warehouse financing relief to Issuers.

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