Tail of Two Securities, Continued: Original HMBS Issuance at 1-year Low; Record Tail Issuance in September

HMBS issuers created $680 million in new HMBS pools during September 2015, the lowest HMBS issuance since March, down from $730 million in August but substantially higher than September 2014’s $498 million. 113 pools were issued, consisting of 57 original issuances and 56 tail pools. Thus far in 2015, HMBS issuance is averaging just over $749 million per month, well above 2014’s $550 million monthly average. Despite the recent decline, HMBS issuance in 2015 exceeds $6.7 billion, surpassing 2014’s 9-month total of $6.6 billion.

September’s $210 million tail pool tally is an all-time record. Never before has tail issuance topped $200 million. Some of this increase is no doubt due to the expiration of the draw restriction for many loans originated in 2014. After one year, the limit on available line of credit expires for many HECMs, significantly increasing the draw rate for these loans.

Original pools (backed by new loans) totaled $470 million, the lowest issuance amount since September 2014. 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. The large majority of the loans in these original pools are only one or two months old.

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. 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 this data from publicly available Ginnie Mae data as well as private sources.)