Total HMBS payoffs in August were 1.1% lower than July; the 1-mo prepayment speed for August was 14.3% compared to July’s 15.4%. Outstanding HMBS increased by $90.1 million to $56.16 billion, only the 6th increase in the last 43 months. The overall decline in HMBS understates the true story in outstanding HMBS and HECMs because negative amortization of underlying HECM loans mitigates dropping HMBS balances. While HMBS balances declined 1.3% and 3.2% over the last one and two years respectively, loan count dropped 5.6% and 11.8% over those same timeframes. The outstanding HMBS population in August 2021 included 309,910 HECMs; as of August 31st there were 237,574.
Finance of America is now the issuer of record for $23.6 billion or 42% of all outstanding HMBS, having replaced Ginnie Mae as the largest portfolio in 2024. Along with Longbridge, these three issuers account for 80% of all outstanding HMBS.
“Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 3,863 former RMF pools. About $204 million of Issuer 42’s portfolio paid off in August, but Issuer 42 still accounts for $10.7 billion, or 19% 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 $312 million. Mandatory Purchases have averaged $410 million over the last 24 months.
New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.