HMBS payoff speeds increased slightly in October; Mandatory Purchases and natural payoffs were approximately 10.1% and 7.6% per annum, respectively. October payoffs totaled about $925 million. Outstanding HMBS decreased slightly and is now just under $59 billion.
As mentioned in previous blogs, Ginnie Mae took over RMF’s HMBS portfolio last December. “Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 4,037 former RMF pools. About $342 million of Issuer 42’s portfolio paid off in October, but Issuer 42 still accounts for $18.5 billion, or 31.4% of all outstanding HMBS. Issuer 42 has not issued any tail pools; we estimate Issuer 42 now has more than a $1 billion uncertificated position, that is, the excess of its HECM asset balance over the balance of its 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, 57.6% of HMBS payoffs last month were due to Mandatory Purchases, totaling about $531 million, an increase from last month’s $512 million, remaining above the average for the prior nine months of 2023 ($501 million per month) and all of 2022 ($315 million per month).
Including the Mandatory Purchases, HMBS paid off at a 17.7% annual rate in October, and 16.8% 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 October 31st were 7.5% per annum, compared to 16.2% for the prior 12 month period.
New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.