HMBS June 2019: Is First Half Glass Empty or Will Second Half Be Glass Full

HMBS June 2019: Is First Half Glass Empty or Will Second Half Be Glass Full

HMBS issuance fell in June 2019 to just over $561 million, ending the slowest half-year of issuance in five years, though yet another uptick in new production gave hope for the second half. No highly seasoned pools were issued. 83 pools were issued in June, including about $331 million of new unseasoned HECM first participation pools. HMBS float will almost certainly fall if June’s payoffs are in line with recent months.
Reverse mortgage lenders face a new era of reduced volume, primarily due to the new lower PLFs for

Home Equity Conversion Mortgages (“HECMs”) in effect since the beginning of Fiscal Year 2018. For the entire year of 2018, HMBS issuance totaled about $9.6 billion, compared to $10.5 billion in 2017. With total issuance at only $3.6 billion at the half-year mark, the HMBS market will be hard pressed to equal last year’s totals, which included some HMBS issuance backed by new HECM loans originated at higher PLFs. For comparison, HMBS issuers sold 116 pools totaling $964 million in June 2018.

Live Well Financial issued 1 HMBS pool in June totaling about $1.3 million. LiveWell recently ceased originating new loans.

June’s production of original new loan pools was about $331 million, compared to $325 million in May, $300 million in April, $277 million in March, $274 in February, and $304 million in January. Last month’s tail pool issuances totaled $230 million, within the range of recent tail issuance. After several months of Groundhog Day mode, with very similar volume statistics, we may be seeing the benefit of lower interest rates helping new origination volume.

June 2019 issuance divided into 28 First-Participation or Original pools and 55 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. Tail HMBS issuance can generate profits for years, helping HMBS issuers during challenging times.

(Editor’s note: The following article was republished with permission from New View Advisors, which  compiled this data from publicly available Ginnie Mae data as well as private sources.)