HMBS May 2022 Part II: May Too Soon To Begin Swoon Which May Loom in June

HMBS payoffs continued in May, as the refinancing wave refuses to ebb. Instead, May payoffs totaled $1.48 billion, just short of March’s 2022 record $1.5 billion. Outstanding HMBS rose to a record $58.3 billion with strong new issuance and a faster roll-up from rising interest rates.

HECM borrowers continue to refinance in large numbers, assisted by a higher HECM lending limit (now $970,800) and surging home prices (nearly 20% year-over-year, according to some measures). So far, rising interest rates have failed to calm this reverse mortgage refinancing wave. The nearly $1.5 billion in payoffs in May represents a 24.6% annual payoff rate.

Given the lag between HECM loan origination and HMBS issuance, the new HECMs backing May’s HMBS pools do not fully reflect the rapid rise in interest rates over the past two months. The numbers for June will test the resilience of this refinancing wave, which began with lower interest rates but continued its momentum from the strong home price appreciation and higher FHA lending limits.

2021 smashed all previous records with a $13.2 billion HMBS issuance total. 2021’s record may fall: over $7.1 billion was issued in the first five months of 2022.

Our friends at Recursion broke down the prepayment numbers further: last month’s 98% MCA mandatory purchases totaled $283 million, 22% of the total.

As a side note, this is New View Advisors’ 300th blog post since we started sharing analysis and observations about the reverse mortgage industry in 2009.  Your input and comments on any of our findings is always welcome.

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

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