HMBS October 2023: [Insert Halloween Metaphor Here]

The HECM market remains scared, spooked, and haunted by the specter of high interest rates. HECM Mortgage-Backed Securities (“HMBS”) issuance totaled $565 million in October, compared to September’s $638 million. Only 87 pools were issued.

FAR was the top issuer in October with $216 million – up from September’s $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 are unlikely to reach half that total in 2023, with year-to-date production less than $5.5 billion through October.

October’s original (first participation) production of $374 million was down from September’s $445 million. The decrease in first participation issuance was partly due to Guild Mortgage Company issuing one $7.5 million pool in October, compared to their four months of production totaling $67 million issued in September. September’s first participation issuance also included a $7.7 million pool of seasoned loans; no seasoned pools were issued in October.

The 87 pools issued in October consisted of 24 first-participation or original pools and 63 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 $199 million, below the typical range.

Notable in the October HMBS issuance data are 23 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 $13.4 million of UPB that may not otherwise have been issued in October. Ginnie Mae recently 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.