Total HMBS payoffs in September decreased from August; overall prepayment speeds were 17.1% per annum compared to August’s 17.4% per annum. Outstanding HMBS decreased by $64 million to $57.93 billion – the tenth consecutive decrease and the 18th in the last 20 months.
Finance of America is the issuer of record for $17.5 billion or 30.2% 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 3,976 former RMF pools. About $331 million of Issuer 42’s portfolio paid off in September, but Issuer 42 still accounts for $15.99 billion, or 28% of all outstanding HMBS. Issuer 42 has not issued any tail pools; we estimate Issuer 42 now has an uncertificated position of over $1.2 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 $431 million.
Including the Mandatory Purchases, HMBS paid off at a 17.1% annual rate in September, and 17.0% over the last 12 months. The average annual rate of payoffs in the prior 12 month period, November 2022 to October 2023, was 16.7%.
New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.
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