HMBS payoffs fell in April, as Mandatory Purchases continued to rise and natural payoffs fell to less than 8% per annum. April payoffs totaled about $900 million, within the range of recent months. Outstanding HMBS fell slightly to $59.5 billion due to continued weak issuance.

Higher interest rates finally caught up with the HMBS market in 2022, driving down PLFs sharply. Big trouble came in the fourth quarter with the trend of declining home prices became more clear and widespread, RMF declaring bankruptcy, AAG selling its assets to FAR, and Ginnie Mae taking over RMF’s HMBS portfolio. In Ginnie Mae’s recent data release, “Ginnie Mae – Reverse Mortgage Funding 42” is now shown as the issuer of record for the 4,046 former RMF pools. About $300 million of Issuer 42’s portfolio paid off in April. Issuer 42 HMBS accounts for just over $20 billion, or just under 34% of all outstanding HMBS.

Might an “Issuer 43” take over this portfolio, or will it be a big melting iceberg like Fannie Mae’s HECM portfolio? Fannie Mae’s portfolio has dwindled from $75 billion to approximately $5 billion today, more than a decade after Fannie bought her last HECM. At a certain point, Issuer 42’s net cash flow will turn positive, with net loan payoffs exceeding borrower credit line draws and other advances. When that point is reached, Ginnie Mae might be tempted to follow her stepsister’s example, and be content to let its HMBS portfolio run off over several years.

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, 56% of HMBS payoffs last month were due to Mandatory Purchase. Last month’s 98% MCA Mandatory Purchases totaled $507 million, the highest dollar total in over 3 years.

Including the Mandatory Purchases, HMBS paid off at a 17.0% annual rate in April, down from March’s 17.8% pace. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly. HMBS payoffs resulting from underlying HECM loan payoffs, including payoffs due to mortality and refinancing, is about 7.4%, compared to 18.4% a year ago.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

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The HMBS new issue market posted its best month of 2023, but that’s not saying much. HECM Mortgage-Backed Securities (“HMBS”) issuance rebounded slightly in April to $534 million, rising month to month for the first time in a year. 80 pools were issued, low by historical standards, but much better than the 53 pools issued in March.

On November 30 of last year, Reverse Mortgage Funding (“RMF”), the largest HMBS issuer of record, filed for bankruptcy. As a result, Ginnie Mae acquired RMF’s HMBS portfolio. Ginnie Mae/RMF (aka “Issuer 42”) issued no HMBS pools in April.

On March 31, American Advisors Group (“AAG”) was purchased by Finance of America Reverse (“FAR”), continuing the industry’s consolidation, leaving four issuers with approximately 90% total market share. Last month, FAR was the top issuer with $207 million.

HMBS issuance set a new record in 2022, with nearly $14 billion issued. In 2023, HMBS issuers are very unlikely to come anywhere near those numbers; the first four months totaled just over $2 billion.

April’s original (first participation) production rose to $379 million, much better than March’s anemic $259 million, February’s $322 million, and January’s $347 million. However, April was weak by historical standards, less than one-third of April 2022’s record $1.4 billion in new issuance.

The 80 pools issued in April consisted of 25 first-participation or original pools and 55 tail pools. Original pools are those HMBS pools backed by first participations in previously uncertificated HECM loans. Tail HMBS issuances are HMBS pools consisting of subsequent participations. Tails are not from new loans, but they do represent new amounts lent. With Ginnie Mae/RMF abstaining from issuance, last month’s tail pool issuances totaled $155 million, well below the typical range.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

What a difference a quarter makes. With FAR’s acquisition of AAG, and RMF’s bankruptcy, FAR is now the lead HMBS issuer with $629 million issued and a commanding 42.7% market share. Longbridge is second, with $313.4 million issued and 21.3% market share, PHH is third with $231.2 million issued and 15.7% market share, and Mutual of Omaha is fourth with $155.4 million issued and 10.6% market share. The Top Four – formerly the Top Five – issuers account for 90% of all HMBS issuance.

2023Q1 saw $1.472 billion of HMBS issued, a run rate of less than $6 billion for calendar year 2023, what would be just 42% of 2022’s nearly $14 billion record issuance tally. There were only nine HMBS issuers during the quarter, the lowest issuer count since the earliest days of the program.

New View Advisors compiled these rankings from publicly available Ginnie Mae data as well as private sources.

The HMBS new issue market fell again to new lows. HECM Mortgage-Backed Securities (“HMBS”) issuance fell sharply in March to $442 million, falling for the eleventh straight month. Only 53 pools were issued. It was the lowest month of issuance since June 2014. As we said last month, this HMBS Winter of Discontent will be long one.

On November 30 of last year, Reverse Mortgage Funding (“RMF”), the largest HMBS issuer of record, filed for bankruptcy. As a result, Ginnie Mae acquired RMF’s HMBS portfolio. Ginnie Mae/RMF (aka “Issuer 42”) issued no HMBS pools in March.

On March 31, American Advisors Group (“AAG”) was purchased by Finance of America, continuing the industry’s consolidation, leaving 4 issuers with approximately 90% total market share. In its last month, AAG still led HMBS issuers with $106 million issued.

HMBS issuance set a new record in 2022, with nearly $14 billion issued. In 2023, HMBS issuers are unlikely to come anywhere near those numbers; the first quarter totaled just under $1.5 billion.

March’s original (first participation) production fell to $259 million, down from $322 million in February, $347 million in January, $448 million in December, $516 million in November and less than one-fifth of April 2022’s record $1.4 billion in new issuance.

The 53 pools issued in March consisted of 19 first-participation or original pools and 34 tail pools. Original pools are those HMBS pools backed by first participations in previously uncertificated HECM loans. Tail HMBS issuances are HMBS pools consisting of subsequent participations. Tails are not from new loans, but they do represent new amounts lent. With Ginnie Mae/RMF abstaining from issuance, last month’s tail pool issuances totaled $183 million, below the typical range.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

HMBS payoffs remained low in February, as Mandatory Purchases continued to rise and natural payoffs remained at less than a 7% per annum rate. February payoffs totaled about $800 million, the fourth lowest payoff amount in nearly 6 years. Outstanding HMBS fell slightly to a record $59.8 billion due to the drop in issuance.

Higher interest rates finally caught up with the HMBS market in 2022, driving down Principal Limit Factors (initial loan-to-value ratios or “PLFs”) sharply. Big trouble came in the fourth quarter. In October, the trend of declining home prices became more clear and widespread. In November, Reverse Mortgage Funding (“RMF”), holder of the largest HMBS servicing portfolio, declared bankruptcy. In December, AAG, the top HECM originator, agreed to sell its assets to Finance of America Reverse, taking another major HMBS issuer out of the picture.

Also in December, Ginnie Mae took over RMF’s HMBS portfolio. In Ginnie Mae’s recent data release, “Ginnie Mae – Reverse Mortgage Funding 42” is now shown as the issuer of record for the 4,052 former RMF pools. About $300 million of Issuer 42’s portfolio paid off in February. “Issuer 42” HMBS accounts for just under $21 billion, or about 34% of all outstanding HMBS.

Issuer 42 is not issuing any tail pools. After nearly three months, we estimate Issuer 42 has an approximate $300 million uncertificated position, that is, the excess of their HECM balance over their HMBS balance. Is there an “Issuer 43” waiting in the wings to take over this portfolio? Or will it be a big melting iceberg, like Fannie Mae’s HECM portfolio, which has dwindled from $75 billion to approximately $5 billion today, more than a decade after Fannie bought her last HECM. Only time will tell.

The lending limit/MCA was raised to $1,089,300 in 2023; it remains to be seen if this will slow the steady decline in industry volume. Higher interest rates and slowing home price appreciation will challenge the HMBS market for the foreseeable future.

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, 58% of HMBS payoffs last month were due to Mandatory Purchase, the highest percentage in 3 ½ years. Last month’s 98% MCA Mandatory Purchases totaled $450 million, the highest dollar total in over 3 years.

Including the Mandatory Purchases, HMBS paid off at a 15.2% annual rate in February, a slight uptick from January, which posted the slowest one-month rate since February 2016. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly. HMBS payoffs resulting from underlying HECM loan payoffs, including payoffs due to mortality and refinncing, is less than 7%, a seven-year low and about one-third the rate of a year ago.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

In February, the HMBS new issue market saw its shadow on Groundhog Day, received no Valentines, and celebrated Millard Fillmore on President’s Day. HECM Mortgage-Backed Securities (“HMBS”) issuance fell in February to $507 million, falling for the tenth straight month. Only 58 pools were issued. Adjusting for day count, it was a repeat of the ten-year lows of January. This HMBS Winter of Discontent will be a long one.

February’s original (first participation) production fell sharply to $322 million, down from $347 million in January, $448 million in December, $516 million in November and less than one-fourth of April 2022’s record $1.4 billion in new issuance. Ginnie Mae/RMF (aka “Issuer 42”) issued no HMBS pools in February. While HMBS issuance set a new record in 2022, with nearly $14 billion issued, in the current market environment, HMBS issuers will not come anywhere near those numbers.

The 58 pools issued in February consisted of 22 first-participation or original pools and 36 tail pools. Original pools are those HMBS pools backed by first participations in previously uncertificated HECM loans. Tail HMBS issuances are HMBS pools consisting of subsequent participations. Tails are not from new loans, but they do represent new amounts lent. With Issuer 42 abstaining from issuance, last month’s tail pool issuances totaled $185 million, well below the typical range.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

HMBS payoffs fell again in January, as the refinancing retreat continues. January payoffs totaled about $756 million, the lowest payoff amount in nearly 6 years and the lowest payoff rate in 7 years. Outstanding HMBS rose to a record $59.9 billion due to the drop in payoffs.

Higher interest rates finally caught up with the HMBS market in 2022, driving down Principal Limit Factors (initial loan-to-value ratios or “PLFs”) sharply. Big trouble came in the fourth quarter. In October, the trend of declining home prices became more clear and widespread. In November, Reverse Mortgage Funding, holder of the largest HMBS servicing portfolio, declared bankruptcy. In December, AAG, the top HECM originator, agreed to sell its assets to Finance of America Reverse, taking another major HMBS issuer out of the picture.

Also in December, Ginnie Mae took over RMF’s HMBS portfolio. In Ginnie Mae’s recent data release, “Ginnie Mae – Reverse Mortgage Funding 42” is now shown as the issuer of record for the 4,053 former RMF pools. About $290 million of Issuer 42’s portfolio paid off in January. “Issuer 42” HMBS accounts for just under $21 billion, or about 35% of all outstanding HMBS.

The 10-year treasury fell sharply in recent weeks and the lending limit/MCA was raised to $1,089,300 in 2023; it remains to be seen if this will slow the steady decline in industry volume.

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, over 60% of HMBS payoffs last month were due to Mandatory Purchase, the highest percentage in 3 ½ years. Last month’s 98% MCA Mandatory Purchases totaled $440 million, the highest dollar total in nearly 3 years.

Including the Mandatory Purchases, HMBS paid off at a 14.2% annual rate in January, the slowest one-month rate since February 2016. Exclusive of Mandatory Purchases, the rate of HMBS payoffs is falling rapidly. HMBS payoffs resulting from underlying HECM loan payoffs, including payoffs due to mortality and refinancing, fell to less than 6%, a seven-year low and less than one-third the rate of a year ago.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

HECM Mortgage-Backed Securities (“HMBS”) issuance collapsed in January to $523 million, falling for the ninth straight month. This monthly total is the lowest in nearly 3 years and the third lowest since 2014. Only 62 pools were issued, the lowest monthly issuance count in ten years.

On November 30 of last year, Reverse Mortgage Funding (“RMF”), the largest HMBS issuer of record, filed for bankruptcy. As a result, Ginnie Mae acquired RMF’s HMBS portfolio. Ginnie Mae/RMF issued no HMBS pools in January. The fate of this large HMBS portfolio is still unclear at this time.
HMBS issuance set a new record in 2022, with nearly $14 billion issued. In the current market environment, HMBS issuers will be hard pressed to come anywhere near those numbers.

January’s original (first participation) production fell sharply to $347 million, down from $448 million in December, $516 million in November and less than one-fourth of April 2022’s record $1.4 billion in new issuance. January’s original new loan pool production was also much less than that of January 2022, when approximately $1.18 billion in original new HMBS pools were issued.

The 62 pools issued in January consisted of 23 first-participation or original pools and 39 tail pools. Original pools are those HMBS pools backed by first participations in previously uncertificated HECM loans. Tail HMBS issuances are HMBS pools consisting of subsequent participations. Tails are not from new loans, but they do represent new amounts lent. With Ginnie Mae/RMF abstaining from issuance, last month’s tail pool issuances totaled $175 million, well below the typical range.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.

HMBS payoffs fell again in December, as the refinancing retreat continued. December payoffs totaled about $815 million, the lowest payoff amount in 23 months and the lowest payoff rate in nearly 7 years. Outstanding HMBS rose to a record $59.8 billion due to faster roll-up from rising interest rates and the drop in payoffs.

Higher interest rates finally caught up with the HMBS market in 2022, driving down Principal Limit Factors (initial loan-to-value ratios or “PLFs”) sharply, but big trouble came in the fourth quarter. In October, the trend of declining home prices became more clear and widespread. In November, Reverse Mortgage Funding, holder of the largest HMBS servicing portfolio, declared bankruptcy. In December, AAG, the top HECM originator, agreed to sell its assets to Finance of America Reverse, taking another major HMBS issuer out of the picture.

Also in December, Ginnie Mae took over RMF’s HMBS portfolio. In Ginnie Mae’s recent data release, “Ginnie Mae – Reverse Mortgage Funding 42” is now shown as the issuer of record for the 4,053 former RMF pools. This new “Issuer 42” accounts for over $21 billion, about 35% of all outstanding HMBS.

The 10-year treasury fell sharply in recent weeks and the lending limit/MCA was raised to $1,089,300 in 2023; it remains to be seen if this will slow the steady decline in industry volume.

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, over 53% of HMBS payoffs last month were due to Mandatory Purchase. Last month’s 98% MCA Mandatory Purchases totaled nearly $414 million, the highest total in 3 years.

Including the Mandatory Purchases, HMBS paid off at a 15.2% annual rate in December, the slowest one-month rate since February 2016. Exclusive of Mandatory Purchases, the rate of HMBS payoffs is falling rapidly. HMBS payoffs resulting from underlying HECM loan payoffs, including payoffs due to mortality and refinancing, fell to about 7% for the first time in 3 years, barely one-third the rate of a year ago.

Despite the recent industry volume slowdown, 2022 set a new record: just under $14 billion in HMBS issued, topping last year’s record of $13.2 billion. With the strong headwinds faced by the reverse mortgage industry, the remaining HMBS issuers will struggle to reach half that total in 2023.

New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.