Outstanding HMBS rose by nearly $300 million in July, helped by a large new pool backed by highly seasoned Home Equity Conversion Mortgages (“HECMs”). Payoffs once again totaled just under $1 billion. Total outstanding HMBS rose to just under $54.5 billion. Without that one pool, HMBS float would have fallen below $54 billion for the first time in over 3 years.
Total HMBS float will likely finally fall further given current trends. HMBS issuance in the first half of 2019 was the lowest half of issuance in five years.
We also predict continuing declines in Mandatory Buyouts in the foreseeable future. “Peak Buyout” was an echo of the peak issuance from 2009 through the first half of 2013. Much of this production has already been repurchased or repaid by borrowers. From now on, billion-dollar-plus payoff months will be the exception rather than the rule. Many HECM loans continue to reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”), but Peak Buyout appears to have ended.
Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases accounted for $610 million, or about 61%, of the payoffs last month. This continues a gradual downward trend from the buyout peak in last year’s third quarter, which averaged over $750 million in Mandatory Purchases per month.
(Editor’s note: The following article was republished with permission from New View Advisors, which compiled this data from publicly available Ginnie Mae data as well as private sources.)