Outstanding HMBS rose to an all-time high of $57.6 billion in February 2022 as issuance outpaced another refinance-driven month of payoffs. HMBS payoffs exceeded $1 billion for the twelfth month in a row. Outstanding HMBS rose by about $288 million. Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $252 million, only 21% of the total. While falling short of January, December, and November’s record payoffs, February came close in both dollar amount and speed: just under $1.2 billion, representing a 22% annual payoff rate.
The latest Ginnie Mae data release also reveals another HMBS issuance portfolio sale: Cherry Creek Mortgage sold its $300 million HMBS portfolio to PHH Mortgage. We noted two months ago that American Advisors Group sold most of its HMBS issuance portfolio to Reverse Mortgage Funding, and Mr. Cooper Group sold its HMBS portfolio to Mortgage Assets Management, LLC (MAM). The resulting consolidation leaves the top five issuers accounting for about 93% of all outstanding HMBS.
In these strategic transactions, the purchasing issuer pays the selling issuer the present value of the issuer’s uncertificated position, which is the difference between future HECM cash flow and future HMBS cash flow. The buyer becomes the issuer of record for the purchased HMBS pools, benefiting from the excess spread of the HECM interest rate over the HMBS pass-through rate, and receives any premiums from future tail issuance. Of course, the buyer also assumes all the liabilities of an HMBS issuer: advancing Mortgage Insurance Premium (MIP), borrower draws, realized losses from claims, and many others.
New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.
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