The reverse mortgage industry’s loan production is a shadow of its former self, with lower origination and loan payoff rates that change little from month to month. In the latest scene from Groundhog Day II, HMBS payoff speeds in January were strikingly similar to those in December; Mandatory Purchases and natural payoffs were approximately 10.1% and 5.9% per annum, respectively. January payoffs totaled about $814 million compared to December’s $819 million. Outstanding HMBS decreased slightly to $58.8 billion.
As mentioned in previous blogs, Ginnie Mae took over RMF’s HMBS portfolio last January. “Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 4,027 former RMF pools. About $315 million of Issuer 42’s portfolio paid off in January, but Issuer 42 still accounts for $17.9 billion, or 30% 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, 63% of HMBS payoffs last month were due to Mandatory Purchase, the highest percentage in nearly five years, totaling about $514 million, an increase from last month’s $501 million, remaining above the average for calendar years 2023 ($504 million per month) and 2022 ($315 million per month).
Including the Mandatory Purchases, HMBS paid off at a 16.0% annual rate in January, and 17.1% 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 January 30th were 7.4% per annum, compared to 13.2% 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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