HMBS payoff speeds decreased in November; Mandatory Purchases and natural payoffs were 10.0% and 6.1% per annum, respectively. November payoffs totaled about $825 million. Outstanding HMBS increased slightly and remains just under $59 billion.

As mentioned in previous blogs, Ginnie Mae took over RMF’s HMBS portfolio last December. “Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 4,033 former RMF pools. About $301 million of Issuer 42’s portfolio paid off in November, but Issuer 42 still accounts for $18.3 billion, or about 31% of all outstanding HMBS. Issuer 42 has not issued any tail pools; we estimate Issuer 42 now has well over a $1 billion uncertificated position, that is, the excess of the portfolio’s HECM asset balance over the balance of its HMBS liability.

When a HECM loan balance reaches 98% of its MCA, the HMBS issuer is required to buy the loans out of the HMBS pool, and then may assign the loan to HUD if the loan is not in default. This is a prepayment event for the HMBS investor, even though the underlying HECM loan remains outstanding. According to our friends at Recursion, 62% of HMBS payoffs last month were due to Mandatory Purchase, totaling about $512 million, a decrease from last month’s $531 million, but remaining above the average for the prior 10 months of 2023 ($496 million per month) and all of 2022 ($315 million per month).

Including the Mandatory Purchases, HMBS paid off at a 16.1% annual rate in November, and 16.9% over the last 12 months. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly over the past 12 months. Natural payoffs (those other than Mandatory Purchases) for the 12 month period ending November 30th were 7.4% per annum, compared to 15.2% for the prior 12 month period.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

The HMBS new issue market was slightly off in November compared to October. HECM Mortgage-Backed Securities (“HMBS”) issuance totaled $561 million in November, relatively the same as October’s $565 million. 110 pools were issued.

FAR was the top issuer in November with $185 million – down from October’s $216 million and September’s $197 million; issuance from Longbridge and Mutual of Omaha each increased approximately $10 million – $134 million and $102 million respectively. Ginnie Mae/RMF (aka “Issuer 42”) again issued no HMBS pools.

HMBS issuance set a record in 2022, with nearly $14 billion issued. HMBS issuers are unlikely to reach half that total in 2023, with year-to-date production less than $6.1 billion through November.

November’s original (first participation) production of $358 million was down from October’s $374 million. November’s first participation issuance also included a $3.3 million pool of seasoned loans.

The 110 pools issued in November consisted of 19 first-participation or original pools, 88 tail pools and 3 pools with both new production and tail participations. 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. Last month’s tail pool issuances totaled $204 million, below the typical range.

Notable in the November HMBS issuance data are 38 pools with aggregate pool size less than $1 million. Issuers are taking advantage of Ginnie Mae’s provision to issue pools as small as $250,000. This represents $21.8 million of UPB that may not otherwise have been issued in November. Ginnie Mae recently issued APM 23-11 which now allows participations from the same loan to be pooled more than once in the same month. Both of these provisions are designed to provide warehouse financing relief to Issuers.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

HMBS payoff speeds increased slightly in October; Mandatory Purchases and natural payoffs were approximately 10.1% and 7.6% per annum, respectively. October payoffs totaled about $925 million. Outstanding HMBS decreased slightly and is now just under $59 billion.

As mentioned in previous blogs, Ginnie Mae took over RMF’s HMBS portfolio last December. “Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 4,037 former RMF pools. About $342 million of Issuer 42’s portfolio paid off in October, but Issuer 42 still accounts for $18.5 billion, or 31.4% of all outstanding HMBS. Issuer 42 has not issued any tail pools; we estimate Issuer 42 now has more than a $1 billion uncertificated position, that is, the excess of its HECM asset balance over the balance of its HMBS liability.

When a HECM loan balance reaches 98% of its MCA, the HMBS issuer is required to buy the loans out of the HMBS pool, and then may assign the loan to HUD if the loan is not in default. This is effectively a prepayment event for the HMBS investor, even though the underlying HECM loan remains outstanding. According to our friends at Recursion, 57.6% of HMBS payoffs last month were due to Mandatory Purchases, totaling about $531 million, an increase from last month’s $512 million, remaining above the average for the prior nine months of 2023 ($501 million per month) and all of 2022 ($315 million per month).

Including the Mandatory Purchases, HMBS paid off at a 17.7% annual rate in October, and 16.8% over the last 12 months. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly over the past 12 months. Natural payoffs (those other than Mandatory Purchases) for the 12 month period ending October 31st were 7.5% per annum, compared to 16.2% for the prior 12 month period.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

The HECM market remains scared, spooked, and haunted by the specter of high interest rates. HECM Mortgage-Backed Securities (“HMBS”) issuance totaled $565 million in October, compared to September’s $638 million. Only 87 pools were issued.

FAR was the top issuer in October with $216 million – up from September’s $197 million; Longbridge was the only other issuer to top $100 million. Ginnie Mae/RMF (aka “Issuer 42”) again issued no HMBS pools.

HMBS issuance set a record in 2022, with nearly $14 billion issued. HMBS issuers are unlikely to reach half that total in 2023, with year-to-date production less than $5.5 billion through October.

October’s original (first participation) production of $374 million was down from September’s $445 million. The decrease in first participation issuance was partly due to Guild Mortgage Company issuing one $7.5 million pool in October, compared to their four months of production totaling $67 million issued in September. September’s first participation issuance also included a $7.7 million pool of seasoned loans; no seasoned pools were issued in October.

The 87 pools issued in October consisted of 24 first-participation or original pools and 63 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. Last month’s tail pool issuances totaled $199 million, below the typical range.

Notable in the October HMBS issuance data are 23 pools with aggregate pool size less than $1 million. Issuers are taking advantage of Ginnie Mae’s provision to issue pools as small as $250,000. This represents $13.4 million of UPB that may not otherwise have been issued in October. Ginnie Mae recently issued APM 23-11 which now allows participations from the same loan to be pooled more than once in the same month. Both of these provisions are designed to provide warehouse financing relief to Issuers.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

HMBS payoff speeds declined in September; Mandatory Purchases and natural payoffs were approximately 9.8% and 7.4% per annum, respectively, though adjusted for day count about the same prepayment rates as August. September payoffs totaled about $900 million. Outstanding HMBS increased for the first time since February 2023 and is now just over $59 billion.

As mentioned in previous blogs, Ginnie Mae took over RMF’s HMBS portfolio last December. “Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 4,040 former RMF pools. About $337 million of Issuer 42’s portfolio paid off in September, but Issuer 42 still accounts for $18.76 billion, or about 32% of all outstanding HMBS. Issuer 42 has not issued any tail pools; we estimate Issuer 42 now has an approximate $1 billion uncertificated position, that is, the excess of their portfolio’s HECM asset balance over the balance of their HMBS liability.

When a HECM loan balance reaches 98% of its MCA, the HMBS issuer is required to buy the loans out of the HMBS pool, and then may assign the loan to HUD if the loan is not in default. This is effectively a prepayment event for the HMBS investor, even though the underlying HECM loan remains outstanding. According to our friends at Recursion, 57% of HMBS payoffs last month were due to Mandatory Purchase, totaling about $512 million, a decline from last month’s $550 million, but still above the average for the prior eight months of 2023 ($500 million per month) and all of 2022 ($315 million per month).

Including the Mandatory Purchases, HMBS paid off at a 17.2% annual rate in September, and 16.7% over the last 12 months. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly over the past 12 months. Natural payoffs (those other than Mandatory Purchases) for the 12 month period ending September 30th were 7.7% per annum, compared to 16.9% for the prior 12 month period.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

FAR remains lead HMBS issuer for Q3, with $1.835 billion issued and 37.4% market share. Longbridge was second, with $1.045 billion issued and 21.3% market share, PHH was third with $783.7 million issued and 16% market share, and Mutual of Omaha was fourth with $690.7 million issued and 14.1% market share. The Top Four issuers again accounted for 89% of all HMBS issuance through September.

2023Q3 saw $1.727 billion issued, barely up from Q2’s $1.703 billion, and a run rate of less than half of 2022’s nearly $14 billion record issuance tally. Of note, Guild Mortgage, formerly Cherry Creek, and Mutual of Omaha Mortgage had quarterly volume increases of 94% and 74%, respectively.

New View Advisors compiled these rankings from publicly available Ginnie Mae data as well as private sources.

The HMBS new issue market improved slightly from August. HECM Mortgage-Backed Securities (“HMBS”) issuance totaled $638 million in September, up from August’s $572 million. 103 pools were issued, low by historical standards. The increase is primarily the result of one issuer pooling four months of production.

FAR was the top issuer in September, with $197 million; Longbridge was the only other issuer to top $100 million. Ginnie Mae/RMF (aka “Issuer 42”) again issued no HMBS pools.

HMBS issuance set a record in 2022, with nearly $14 billion issued. HMBS issuers will not come anywhere near those numbers in 2023; the first three quarters totaled only about $4.9 billion.

September’s original (first participation) production of $445 million was up from August’s $391 million. The increase in first-participation issuance was primarily a function of Guild Mortgage Company, the purchaser of Cherry Creek Mortgage, issuing $67 million in first participation pools. Cherry Creek has not issued pools since May; the $67 million represents four months of loan origination – squashing hopes September issuance represents a market turnaround. September issuance was weak by historical standards, about two-thirds of September 2022’s $966 million in new issuance.

The 103 pools issued in September consisted of 26 first-participation or original pools and 77 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. Last month’s tail pool issuances totaled $193 million, which remains below the typical range.

Notable in the September HMBS issuance data are the 25 pools with aggregate pool size less than $1 million. Issuers are taking advantage of Ginnie Mae’s provision to issue pools as small as $250,000. This represents $15.6 million of UPB that would not otherwise have been issued in September. Ginnie Mae just issued APM 23-11 which now allows participations from the same loan to be pooled more than once in the same month. Both of these provisions are designed to provide warehouse financing relief to Issuers.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

HMBS payoffs increased in August, as Mandatory Purchases continued to rise and natural payoffs increased to approximately 8.2% per annum. August payoffs totaled about $980 million. Outstanding HMBS fell for the seventh month in a row and is now under $59 billion for the first time in a year due to continued weak issuance.

Higher interest rates finally caught up with the HMBS market in 2022, driving down Principal Limit Factors (initial loan-to-value ratios or “PLFs”) sharply. Big trouble came in the fourth quarter. In October, the trend of declining home prices became more clear and widespread. In November, Reverse Mortgage Funding (“RMF”), holder of the largest HMBS servicing portfolio, declared bankruptcy. In December, AAG, the top HECM originator, agreed to sell its assets to Finance of America Reverse, taking another major HMBS issuer out of the picture.

Also in December, Ginnie Mae took over RMF’s HMBS portfolio. In Ginnie Mae’s recent data release, “Ginnie Mae – Reverse Mortgage Funding 42” is now shown as the issuer of record for 4,042 former RMF pools. About $339 million of Issuer 42’s portfolio paid off in August. “Issuer 42” HMBS accounts for just over $19 billion, or about 32% of all outstanding HMBS.

Issuer 42 is not issuing any tail pools. We estimate Issuer 42 has an approximate $900 million uncertificated position, that is, the excess of their portfolio’s HECM asset balance over the balance of their HMBS liability. So far Ginnie Mae’s position is like Fannie Mae’s HECM portfolio, a big melting iceberg which has dwindled from $75 billion to less than $5 billion today, more than a decade after Fannie bought her last HECM.

The lending limit/MCA was raised to $1,089,300 in 2023; so far this has not prevented a significant decline in industry volume. Higher interest rates and slowing home price appreciation will challenge the HMBS market for the foreseeable future.

When a HECM loan balance reaches 98% of its MCA, the HMBS issuer is required to buy the loans out of the HMBS pool, and then may assign the loan to HUD if the loan is not in default. This is effectively a prepayment event for the HMBS investor, even though the underlying HECM loan remains outstanding. According to our friends at Recursion, 56% of HMBS payoffs last month were due to Mandatory Purchase, totaling about $550 million, continuing a trend of rising HMS buyouts and HECM assignments to HUD.

Including the Mandatory Purchases, HMBS paid off at an 18.8% annual rate in August, and 16.9% over the last 12 months. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly over the past twelve months. Natural payoffs (those other than Mandatory Purchases) for the 12 month period ending 8/31/2023 were 7.9% per-annum compared to 17.5% for the prior 12 month period.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

The HMBS new issue market improved over July with a small rebound in August, but overall it’s been a bad summer. HECM Mortgage-Backed Securities (“HMBS”) issuance totaled $572 million in August, up from July’s $518 million. 97 pools were issued, low by historical standards.

On November 30 of last year, Reverse Mortgage Funding (“RMF”), the largest HMBS issuer of record, filed for bankruptcy. As a result, Ginnie Mae acquired RMF’s HMBS portfolio. Ginnie Mae/RMF (aka “Issuer 42”) issued no HMBS pools in July.

On March 31, American Advisors Group was purchased by Finance of America (“FAR”), continuing the industry’s consolidation, leaving four issuers with approximately 90% total market share. Last month, FAR was the top issuer with $228 million; Longbridge was the only other issuer to top $100 million.

HMBS issuance set a new record in 2022, with nearly $14 billion issued. In 2023, HMBS issuers will not come anywhere near those numbers; the first eight months totaled approximately $4.3 billion.

August’s original (first participation) production of $391 million was up 17% from July’s weak $335 million, and more in line with June’s $384 million, May’s $353 million, and April’s $379 million. Most of August’s increase in first-participation issuance was a function of a $60 million increase from FAR. August new issuance was very weak by historical standards, less than half of August 2022’s $988 million.

The 97 pools issued in August consisted of 24 first-participation or original pools and 73 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. Last month’s tail pool issuances totaled $181 million, below the typical range.

Notable in the August HMBS issuance data are the 26 pools with aggregate pool size less than $1,000,000. Issuers are taking advantage of the new provision from Ginnie Mae to issue smaller pools, designed to provide warehouse financing relief to Issuers.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

HMBS payoffs fell in July, as Mandatory Purchases continued to rise and natural payoffs fell to approximately 8% per annum.  July payoffs totaled about $950 million. Outstanding HMBS fell for the sixth month in a row to just over $59.1 billion due to weak issuance.

As is widely known, Ginnie Mae took over RMF’s HMBS portfolio in December. In Ginnie Mae’s recent data release, “Ginnie Mae – Reverse Mortgage Funding 42” is now shown as the issuer of record for 4,044 former RMF pools. About $340 million of Issuer 42’s portfolio paid off in July. “Issuer 42” HMBS accounts for just under $19.3 billion, or about 33% of all outstanding HMBS.

Issuer 42 is not issuing any tail pools. We estimate Issuer 42 has an approximate $800 million uncertificated position, that is, the excess of their portfolio’s HECM asset balance over the balance of their HMBS liability. So far Ginnie Mae’s position is like Fannie Mae’s HECM portfolio, a big melting iceberg which has dwindled from $75 billion to less than $5 billion today, more than a decade after Fannie bought her last HECM.

The lending limit/MCA was raised to $1,089,300 in 2023; so far this has not prevented a significant decline in industry volume. Higher interest rates and slowing home price appreciation will challenge the HMBS market for the foreseeable future.

When a HECM loan balance reaches 98% of its MCA, the HMBS issuer is required to buy the loans out of the HMBS pool, and then may assign the loan to HUD if the loan is not in default. This is effectively a prepayment event for the HMBS investor, even though the underlying HECM loan remains outstanding. According to our friends at Recursion, 58% of HMBS payoffs last month were due to Mandatory Purchase, totaling about $541 million, continuing a trend of rising HMS buyouts and HECM assignments to HUD.

Including the Mandatory Purchases, HMBS paid off at an 17.8% annual rate in July, and 17.0% over the last 12 months, the lowest annual rate in more than six years. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly over the past twelve months.  HMBS payoffs resulting from underlying HECM loan payoffs, including payoffs due to mortality and refinancing, is about 8%, under its long-term average.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.