HMBS issuers created approximately $639 million in new HMBS pools during March 2016, with a weak tally in original loan pools somewhat mitigated by strong tail issuance totaling about $219 million. Last month’s HMBS issuance total fell short of both February’s $768 million and March 2015’s $660 million. 93 pools were issued, consisting of only 40 original pools and 53 tail pools. The number of original pools was the lowest since April 2014. Original pools are those HMBS pools backed by the first participation in a previously uncertificated HECM loan, typically a recently originated HECM loan. Only $420 million in original loan pools were issued, the lowest dollar tally since September 2014. Unlike February, no new large pools with seasoned loans padded the HMBS totals.
FHA’s new Financial Assessment requirements for newly originated HECM loans are the main driver for the reduced loan volume, which has reduced monthly HMBS issuance from $874 million in May 2015.
Total outstanding HMBS is $53.823 billion, up slightly from just under $53.757 billion at the end of February. We estimate that this increase is composed of approximately $168 million in negative amortization, plus the $639 million in new issuance, minus about $741 million in payoffs.
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. Tail Issuances accounted for about 34.2% of March’s total, the third highest tail percentage ever. Newly originated loans comprise a large majority of HMBS issuance in any given month. As a result, HMBS issuance is a good barometer of recent HECM production.
New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.