HMBS Issuance Ramps Down Again in August 2015

HMBS issuers created $730 million in new HMBS pools during August 2015, the lowest HMBS issuance since March, down from $809 million in July but substantially higher than August 2014’s $517 million. 94 pools were issued, consisting of 50 original issuances and 44 tail pools. Thus far in 2015, HMBS issuance is averaging just over $757 million per month, well above 2014’s $550 million monthly average.

FHA’s new Financial Assessment requirements for newly originated HECM loans are the main driver for the reduced loan volume, which has reduced HMBS issuance from a 2015 peak of $874 million in May.

Total outstanding HMBS is about $52.2 billion, up from just under $52.0 billion at the end of July. We estimate that this increase is composed of approximately $161 million in negative amortization, plus the $730 million in new issuance, minus about $681 million in payoffs. Total outstanding HMBS has been increasing each month, but at a slower and slower rate. Monthly increases the past 4 months have been $409 million, $350 million, $283 million, and $209 million in May, June, July and August, respectively. With payoff amounts increasing each month, total HMBS outstanding could shrink for the first time later this year.

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 $178 million, about 24% of August’s total. 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.

(Note: The following was published by New View Advisors, which compiled data from publicly available Ginnie Mae data as well as private sources.)