Total HMBS payoffs in November decreased from October; 1-mo prepayment speeds were 14.8% per annum compared to October’s 18.8% per annum. Outstanding HMBS increased by $113 million to $57.95 billion – the first increase in 12 months and only the third in the last 22 months.
Finance of America is the issuer of record for $17.6 billion or 30.4% 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 3,973 former RMF pools. About $315 million of Issuer 42’s portfolio paid off in November, but Issuer 42 still accounts for $15.5 billion, or 27% of all outstanding HMBS. Issuer 42 has not issued any tail pools; we estimate Issuer 42 still has an uncertificated position of over $1 billion, 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 $308 million – a dramatic reduction from recent months likely due to lower rates in September and October. Mandatory Purchases have averaged $430 million, $446 million and $460 million over the last 6 months, 12 months and 24 months respectively.
New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.
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