After a “record-smashing” November, issuance of Ginnie Mae Home Equity Conversion Mortgage mortgage-backed securities (HMBS) normalized in December as the HMBS market continues adjusting to the post-Financial Assessment era, according to the latest commentary from New View Advisors.
Issuers created approximately $685 million in new HMBS pools last month, substantially less than November’s $1.2 billion total. Without any large seasoned pools, New View Advisors notes HMBS reverted to what is now a “more usual” month of issuance: $525 million in original loan pools and tail issuance of $170 million.
December’s issuance breakdown comprised of 92 total pools, which consisted of 48 original issuances and 44 tail pools.
Original HMBS pools are created when a pool of Federal Housing Administration-insured HECMs is securitized for the first time. Tail HMBS issuances, on the other hand, are HMBS pools created from the uncertificated portions of previously securitized HECMs.
“Newly originated loans usually comprise a large majority of HMBS issuance in any given month,” writes New View Advisors in its latest market commentary. “As a result, HMBS issuance is a good barometer of recent HECM production.”
December’s numbers brought total 2015 issuance to approximately $9.5 billion. Considerably higher than the previous year’s $6.6 billion tally, this $2.9 billion increase in 2015 consisted of a $1 billion growth in tail issuance, a $0.3 billion increase in seasoned original pool issuance, and an “encouraging” $1.6 billion increase in HMBS issues backed by pools of new loans, according to New View Advisors’ data, which is compiled from publicly available Ginnie Mae data as well as private sources.
Through December, total outstanding HMBS is about $53.3 billion, an increase of only $58 million from the end of November.
“We estimate this small increase is composed of approximately $162 million in negative amortization, plus the $685 million in new issuance, minus a record $789 million in payoffs,” writes New View Advisors.
Payoffs, New View Advisors notes, are trending higher, driven primarily by assignments to the Department of Housing and Urban Development of seasoned HECM loans whose loan balances have reached 98% of their Maximum Claim Amount.
“Total HMBS float could soon shrink for the first time as early as this month,” writes New View Advisors.
Meanwhile, the supply of outstanding fixed-rate HMBS is shrinking rapidly, falling approximately $200 million from the end of November to $29.1 billion at the end of 2015. This year-end figure represents an almost $2.5 billion decline from its peak of about $31.5 billion in mid-2014, according to New View Advisors’ analysis.
During 2015, fixed-rate issuance accounted for only 19% of total issuance, down from 32.1% in 2014.
Read the New View Advisors commentary.
Written by Jason Oliva
