HMBS March 2019 Part II: March Backwards – Big Payoffs Drive Down HMBS Float

HMBS float fell again in March as a big payoff total continued to outweigh issuance. With over $950 million in payoffs and a continued drought of new issuance, total outstanding HMBS ended the month just under $54.6 billion, down about $200 million from February. HMBS float had been range-bound between just under $55 billion to $57 billion for over two years. The current float is the lowest since August 2016.

Total HMBS float will likely fall further given current trends. As we noted last week, HMBS issuance was only about $557 million in March, with one highly seasoned new issue.

We predict continuing declines in Mandatory Buyouts in the foreseeable future. “Peak Buyout” was an echo of the peak issuance from 2009 through the first half of 2013. Much of this production has already been repurchased or repaid by borrowers. Although March came close, billion-dollar-plus payoff months will be the exception rather than the rule. Many loans continue to reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”), but Peak Buyout appears to have ended.

Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $616 million, or about 63%, of the payoffs last month. This continues a gradual downward trend from the buyout peak in last year’s third quarter, which averaged over $750 million in Mandatory Purchases per month.

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

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