Page 368 - 2019 6th AFIS & ASMMA
P. 368
The last thing I wanted to take a look at is the actual trading activity
of the mortgage-backed securities. Those loans are traded in the capital
market, and take a look if the HMBS, the mortgage-backed securities
based on reverse mortgage are similar or different from the regular
forward mortgage-backed security loans. Based on about four years’
worth of trade database, it is estimated that the total number of trade
is about 15,000 for the HECM mortgage-backed securities, and about
540,000 for the regular Genie Mae forward MBS. So it's going to be
about thirty, thirty-five-times more. This is obvious because the prime
origination is much larger for the forward mortgage loans.
But other characteristics turn out to be pretty similar. If you're looking
at how the trade actually works, the fixed income trade happens between
the customer and the dealers or between the dealers, right? In the case
where are the HMBS, the customer trade is about 60 percent, and 40 Session III
percent is going to be inter-dealer trade. For the forward mortgage-
The pattern of the prepayments is similar, even though prepayment backed securities, about seventy percent is for the customer trade and
speeds are a bit slower. The individual rules might be quite different thirty percent for the inter-dealer trade. So we have more in inter-dealer
between the reverse mortgage and forward mortgages, but as a mortgage trades with HECM mortgage-backed securities because of the low
pool, you know the cash flow characteristics look a lot more similar. liquidity; the dealers will have more difficulty in managing the inventory,
However, note that the prepayment behavior of the US mortgage is pretty so it leads to more inter-dealer trading.
volatile, too - as you can see from this prepayment behavior, there is a
trend in the prepayment for the reverse mortgage loans. The size of each trade is pretty similar, especially for the customer
trades. So every size of the trade is about three million dollars for the
HECM MBS and the forward MBS. How frequently are they traded? If
you count the number of days where there's no trading, for the HECM
based trading we have about 36 percent of the days of the MBS not being
traded. For the forward mortgage-backed securities, it is pretty similar
with about 30 percent.
370 2019 6th AFIS & ASMMA Annual Meeting 371
