HMBS May 2024 Part II: FAR Ahead

Finance of America has replaced Ginnie Mae as the top HMBS Issuer of record, with $17.2 billion, or about 29.5% of all outstanding HMBS. Along with Ginnie Mae (29%), Longbridge (14%), and Onity (13%), the top four Issuers account for 86% of outstanding HMBS.

As mentioned in previous blogs, Ginnie Mae took over RMF’s HMBS portfolio in December 2022. “Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 3,993 former RMF pools. About $352 million of Issuer 42’s portfolio paid off in May, but Issuer 42 still accounts for $16.90 billion of all outstanding HMBS. Issuer 42 has not issued any tail pools; we estimate Issuer 42 now has approximately $1.1 billion uncertificated position, that is, the excess of their portfolio’s HECM asset balance over the balance of their HMBS liability.

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 9.7% per annum compared to April’s 9.8% per annum.

Total HMBS payoffs in May showed a slight increase versus April; overall prepayment speeds increased to 18.1% per annum from April’s 17.9% per annum, and 17.3% over the last 12 months. Exclusive of Mandatory Purchases, the rate of HMBS payoffs over the past 12 months is well below the prior 12 months. Natural payoffs (those other than Mandatory Purchases) for the 12 month period ending May 31st were 7.4% per annum, compared to 9.4% for the prior 12 month period.

Outstanding HMBS decreased to $58.3 billion – the sixth consecutive decrease and 14th out of the last 16 months.

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

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