Total HMBS payoffs in August decreased from July; overall prepayment speeds were 17.4% per annum compared to July’s 18.0% per annum. Outstanding HMBS decreased by $90 million to $57.99 billion – the ninth consecutive decrease and 17th in the last 19 months.
Finance of America is the issuer of record for $17.4 billion or 30.1% 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.
“Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 3,979 former RMF pools. About $332 million of Issuer 42’s portfolio paid off in August, but Issuer 42 still accounts for $16.23 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 $417 million.
Including the Mandatory Purchases, HMBS paid off at a 17.4% annual rate in August, and 17.1% over the last 12 months. The average annual rate of payoffs in the prior 12 month period, October 2022 to September 2023, was 16.7%.
Comments for Ginnie Mae’s proposed “HMBS 2.0” program were due July 31st. The new HMBS program will allow securitization of HECM loans that have UPBs in excess of 98% of the Maximum Claim Amount. While there is no announced launch date, if 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.
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