Total HMBS payoffs in May increased from April; 1-mo prepayment speeds were 18.9% per annum compared to April’s 18.5% per annum. Outstanding HMBS decreased by $153 million to $57.3 billion – the 24th decrease in the last 28 months. Because of the program’s negative amortization, declining outstanding HMBS balances mask the true decline in outstanding loan count. For example, while HMBS balances have declined by 1.7% and 3.5% over the last one and two years respectively, loan count has declined by 7.5% and 12.6% over those same timeframes.
Finance of America is the issuer of record for $17.8 billion or 31% 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 continue to account for 89% of outstanding HMBS.
“Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 3,955 former RMF pools. About $340 million of Issuer 42’s portfolio paid off in May, but Issuer 42 still accounts for $13.9 billion, or 24% 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 $450 million. Mandatory Purchases have averaged $446 million, $428 million and $455 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.