HMBS payoff speeds declined in September; Mandatory Purchases and natural payoffs were approximately 9.8% and 7.4% per annum, respectively, though adjusted for day count about the same prepayment rates as August. September payoffs totaled about $900 million. Outstanding HMBS increased for the first time since February 2023 and is now just over $59 billion.
As mentioned in previous blogs, Ginnie Mae took over RMF’s HMBS portfolio last December. “Ginnie Mae – Reverse Mortgage Funding 42” remains as issuer of record for 4,040 former RMF pools. About $337 million of Issuer 42’s portfolio paid off in September, but Issuer 42 still accounts for $18.76 billion, or about 32% of all outstanding HMBS. Issuer 42 has not issued any tail pools; we estimate Issuer 42 now has an approximate $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, 57% of HMBS payoffs last month were due to Mandatory Purchase, totaling about $512 million, a decline from last month’s $550 million, but still above the average for the prior eight months of 2023 ($500 million per month) and all of 2022 ($315 million per month).
Including the Mandatory Purchases, HMBS paid off at a 17.2% annual rate in September, and 16.7% over the last 12 months. Exclusive of Mandatory Purchases, the rate of HMBS payoffs has fallen significantly over the past 12 months. Natural payoffs (those other than Mandatory Purchases) for the 12 month period ending September 30th were 7.7% per annum, compared to 16.9% for the prior 12 month period.
New View Advisors compiled this data from publicly available Ginnie Mae data as well as private sources.