HMBS May 2021 Part II: We’re An All-Time High

Outstanding HMBS rose to a record $56.5 billion in May 2021, as payoffs and issuance remained high.  Payoffs and issuance totaled just over $1 billion; total outstanding HMBS rose by just over $120 million, the approximate amount of total negative amortization.  The big payoff reflects continued high levels of refinancing.

February was the last month in which GNMA allowed issuance of HMBS pools backed by first participations of LIBOR-indexed loans.  For the time being, the Treasury CMT index replaces LIBOR as the base index for newly originated adjustable-rate HECM loans.

In 2019, HMBS posted its lowest annual issuance total in five years.  But in 2020 low interest rates and a higher lending limit boosted production significantly to a near-record $10.6 billion.  So far this year, HMBS new issuance already totals $4.8 billion, on pace to exceed $11 billion in 2021.

“Peak Buyout” was an echo of the peak issuance from 2009 through the first half of 2013.  Most of this production has already been repurchased by the issuers or repaid by borrowers.  Each month fewer and fewer of these peak issuance loans remain, and with lower interest rates loans take longer to roll up to their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”).  Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $199 million, falling below $200 million for the first time in nearly seven years.

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



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