Strange Tail of 2014 HMBS: Record Low Dollar Volume, Record High Number of Pools

HMBS issuers sold $6.6 billion in new pools during 2014, down 31% from 2013. 2014 was the lowest full year of issuance since 2008, when HMBS was a fledgling program that had yet to be adopted by most market participants. The total number of pools was a different story: an all-time record 1,026 pools were issued in 2014, 3 more than the previous record set one year ago. Tail issuance accounted for over 24% of this year’s issuance, significantly up from its 15% market share in 2013. This was a bright spot for HMBS issuers as the securitization of additional amounts or “tails” continued to grow. We expect this trend to continue in 2015.

RMS led all issuers with 144 pools totaling $1.480 billion, followed by Urban Financial of America with 200 pools totaling $1.193 billion, and AAG a close third with 116 pools and $1.173 billion. RMS was also the top issuer in 2013 with nearly $2.9 billion HMBS issued. Liberty Home Equity Solutions, LiveWell Financial, Nationstar Mortgage, Generation Mortgage, new entrant Reverse Mortgage Funding, SunWest Mortgage and Plaza Mortgage rounded out the top 10. Three occasional issuers, Bank of America, OneWest Bank, and Silvergate Bank placed 11th, 12th, and 13th.

Fixed rate issuance fell from 48% to 32% of total HMBS issuance in 2014, reflecting the changing product mix brought on by FHA’s program changes.

December’s $649 million in HMBS issuance was the third highest in 2014. 91 pools were issued last month, the fourth month in 2014 with that exact tally. These 91 pools consisted of 50 original issuances and 41 tail pools. By comparison, HMBS issuance totaled $826 million in December 2013, and averaged nearly $800 million per month during 2013. In 2014, HMBS issuance averaged only $552 million per month.

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. 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 $285 billion issued in 2014 through November, compared to just over $417 billion in 2013. (These figures include both forward and reverse, Ginnie Mae I and Ginnie Mae II securities.)

(Note: The following was published by New View Advisors, which compiles rankings from publicly available Ginnie Mae data.)