Total HMBS payoffs in July increased from June; overall prepayment speeds climbed to 18.0% per annum from June’s 16.7% per annum. Due to higher prepayments and lower new issuance, outstanding HMBS decreased by $173 million to $58.1 billion – the eighth consecutive decrease and the 16th in the last 18 months.
Finance of America is the issuer of record for $17.4 billion or 29.9% of all outstanding HMBS, having replaced Ginnie Mae as the largest portfolio in May. Along with Longbridge and PHH, the top four issuers of record account for 86% of outstanding HMBS.
As everyone knows, Ginnie Mae took over RMF’s HMBS portfolio in December 2022. “Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 3,983 former RMF pools. About $349 million of Issuer 42’s portfolio paid off in July, but Issuer 42 still accounts for $16.47 billion, or 28% of all outstanding HMBS. Issuer 42 has not issued any tail pools; we estimate Issuer 42 now has an approximate $1.2 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 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, payoffs last month due to Mandatory Purchases were $425 million.
Including the Mandatory Purchases, HMBS paid off at a 18.0% annual rate in July, and 17.2% over the last 12 months. The average annual rate of payoffs in the prior 12 month period, September 2022 to August 2023, was 16.8%.
Ginnie Mae published its “HMBS 2.0” Term Sheet for comment June 27th. The new HMBS program will allow securitization of HECM loans that have UPBs in excess of 98% of the Maximum Claim Amount. Once implemented, HMBS 2.0 will likely increase HMBS issuance substantially by financing a majority of mandatory buyouts.
New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.
Leave a Reply