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Reverse mortgage securities fall to near 5-year low

Will this downward trend right itself anytime soon?

In a troubling sign of the poor health of the reverse mortgage market, issuance of HECM-backed securities fell to their lowest level in nearly five years.

According to the latest commentary from New View Advisors, reverse mortgage issuance totaled just under $491 million in February, which was partly a result of the short month and as well as a lack of highly seasoned pools.

In all, 82 pools were issued in February, which included $274 million in new pools, New View said. This is down from January’s $304 million and December’s $277 million, and well below the $360 million issued in September 2018.

Tail issuance totaled $217 million, within the range of recent tail issuance but down significantly from the $1.47 billion in tail pools issued in February 2018.

New View said February’s total is consistent with the overall downward trend of reverse mortgage securities, calling the latest totals “Groundhog Day” for the HECM securities market as the market continues to see startlingly low issuance levels.

In 2018, issuance of HECM-mortgage backed securities, or HMBS, totaled $9.6 billion, New View said, compared with $10.5 billion in 2017.

“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,” the analysts wrote.

HMBS float also fell in February, dropping below the $55-$57 billion range where it has hovered for the last several months.

Outstanding HMBS totaled $54.8 billion, down over $225 million from January. New View said HMBS float fell because of more than $900 million in payoffs and a drought in new issuance, adding that it “will likely fall further given current trends.”

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