HMBS March 2024 Part II: Another Eclipse

After four months of increasingly lower prepayments, total HMBS payoffs in March increased by over $100 million; overall prepayment speed increased to 17.7% per annum from February’s 15.7% per annum. Outstanding HMBS decreased to $58.6 billion.

Ginnie Mae Issuer 42 remains issuer of record for 4,006 former RMF pools. About $323 million of Issuer 42’s portfolio paid off in March, but Issuer 42 still accounts for $17.4 billion, or 29.8% of all outstanding HMBS. Issuer 42 has not issued any tail pools and now has well over a $1 billion uncertificated position, that is, the excess of the portfolio’s HECM asset balance over the balance of its HMBS liability.

Close behind, Finance of America Reverse is the issuer of record for $17.1 billion, or 29.2% of all outstanding HMBS. With Issuer 42 not issuing tail pools, expect FAR to eclipse Ginnie Mae in the second quarter as top Issuer.

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, payoffs last month due to Mandatory Purchases occurred at a rate of 9.0% per annum compared to February’s 9.2% per annum.

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

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