March HMBS Issuance Stays On Par With Recent Trends

The production of new Home Equity Conversion Mortgage-backed securities (HMBS) increased slightly in March to just under $558 million, remaining generally consistent with lower issuance levels observed in recent months. However, one highly seasoned pool is credited with the slight bump in volume. This is according to publicly available GNMA data and private sources compiled by New View Advisors.

“88 pools were issued in March, including about $277 million of new first participation pools,” New View wrote in its commentary accompanying the March data. “HMBS float shrinkage will continue as March’s payoffs are almost certain to outweigh new issuance and interest roll-up.”

HMBS issuers brought a total of just under $1.7 billion to market over the course of Q1 2019, “the lowest quarter of HMBS issuance since the third quarter of 2014,” New View wrote. This general reduction in activity continues to stem from the changes instituted to the Home Equity Conversion Mortgage (HECM) program at the beginning of the 2018 fiscal year, reducing principal limit factors (PLFs), according to New View.

“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,” New View added.

When asked what the relative consistency exhibited this month could mean for the ongoing rate of HMBS issuance, New View partner Michael K. McCully said that these figures are in-line with what has been seen in the government’s own reporting concerning the HECM program.

“The new normal securitized volume of newly originated HECMs is $250 – $300 million per month, approximately half of what had been securitized monthly before Mortgagee Letter 17-12 was implemented,” McCully told RMD in an email. “This is consistent with the endorsement figures submitted to Congress in the FHA 2019 Q1 report released last week.”

The production of new, original new loan pools came in at about $274 million, which is on par with the production levels recorded in February. Last month’s tail pool issuances totaled $220 million, which is generally still within the range of recent tail issuances recorded in months prior. Still, the total of sold pools and their dollar amounts is considerably lower than where these figures were at the same time last year.

“For the past few months, the new issuance market has settled into Groundhog Day mode, with very similar volume statistics other than the occasional seasoned first participation issue. For comparison, HMBS issuers sold 115 pools totaling $626 million in March 2018,” the commentary wrote.

Read the full commentary at New View Advisors.

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