Outstanding HMBS rose by about $125 million in November, as both payoffs and new issuance continued strong. Payoffs remained at about $950 million, despite the lower level of mandatory buyouts. Total outstanding HMBS rose again, to over $55.5 billion, the highest total in over two years.
In 2019, HMBS posted its lowest annual issuance total in five years. But 2020 has shaped up differently; low interest rates and a higher lending limit boosted production significantly. This trend will likely continue for December as HMBS issuers rush to beat the year-end LIBOR deadline, after which no new first-participation LIBOR pools may be issued. Beginning in 2021, the industry may struggle to reach the same levels of production.
“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 by the issuers or repaid by borrowers. Each month fewer and fewer of these peak issuance loans remain, and so fewer HECM loans reach their buyout threshold, equal to 98% of their Maximum Claim Amount (“MCA”). Our friends at Recursion broke down the prepayment numbers further: the 98% MCA mandatory purchases totaled $254 million, just above September’s 5-year low. This continues the downward trend from the buyout peak in the third quarter of 2018, which averaged over $750 million in Mandatory Purchases per month. With buyouts at one-third their peak level, Peak Buyout is long gone.
(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.)