Total HMBS payoffs in December increased from November; 1-mo prepayment speeds were 18.3% per annum compared to November’s 14.8% per annum. Outstanding HMBS decreased by $86 million to $57.87 billion – the 20th decrease in the last 23 months.
HMBS payoffs exceeded new issuance by nearly $5 billion in 2024, however due to loan roll-up and additional amounts lent on existing loans, total HMBS float declined by only $1 billion. However, HMBS float will decline even faster if the payoff/new issuance imbalance continues.
Finance of America is the issuer of record for $17.6 billion or 30.5% of all outstanding HMBS, having replaced Ginnie Mae as the largest portfolio in May 2024. Along with Longbridge and PHH, the top four issuers of record account for 90% of outstanding HMBS.
“Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 3,972 former RMF pools. About $360 million of Issuer 42’s portfolio paid off in December, but Issuer 42 still accounts for $15.2 billion, or 26% 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 $440 million. Mandatory Purchases have averaged $413 million, $427 million and $458 million over the last 6 months, 12 months and 24 months, respectively.
New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.