HMBS June 2022 Part II: Refi Swoon Began in June

HMBS payoffs fell in June, as the refinancing wave finally began its retreat. June payoffs totaled just over $1.1 billion, the lowest amount in over a year. Outstanding HMBS rose to a record $58.6 billion due to continued strong new issuance and a faster roll-up from rising interest rates.

The HECM refinance wave was assisted by the higher HECM lending limit (now $970,800) and surging home prices (nearly 20% year-over-year, according to some measures). Higher interest rates have finally caught up with the HMBS market, driving down principal limit factors (initial loan-to-value ratios) sharply.

June’s $1.1 billion payoff represents a 21% annual rate, still high by historical standards but bound to fall further in the third quarter. Given the lag between HECM loan origination and HMBS issuance, the new HECMs backing June’s HMBS pools still do not fully reflect the rapid rise in interest rates.

Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $279 million, 25% of the total.

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

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