HMBS payoff speeds in December were basically unchanged from November; Mandatory Purchases and natural payoffs were approximately 9.9% and 6.2% per annum, respectively. December payoffs totaled about $819 million compared to November’s $825 million. Outstanding HMBS decreased slightly and remains just under $59 billion.
As mentioned in previous blogs, Ginnie Mae took over RMF’s HMBS portfolio last December. “Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 4,030 former RMF pools. About $300 million of Issuer 42’s portfolio paid off in December, but Issuer 42 still accounts for $18.1 billion, or about 31% of all outstanding HMBS. Issuer 42 has not issued any tail pools; we estimate Issuer 42 now has well over $1 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 may 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, 61% of HMBS payoffs last month were due to Mandatory Purchase, totaling about $502 million, a decrease from last month’s $512 million, remaining above the average for the prior 11 months of 2023 ($497 million per month) and all of 2022 ($315 million per month).
Including the Mandatory Purchases, HMBS paid off at a 16.1% annual rate in December, and 17.0% over the last 12 months. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly over the past 12 months. Natural payoffs (those other than Mandatory Purchases) for the 12 month period ending December 30th were 7.4% per annum, compared to 14.2% for the prior 12 month period.
New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.
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