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Despite dire predictions from many quarters the
Federal Housing Administration's (FHA's) Mutual Mortgage Insurance Fund (MMIF)
has returned to solvency. And it did it
a full three years ahead of the best estimates back in 2012. The Department of Housing and Urban
Development (HUD) said on Monday that the Fund has gained nearly $6 billion in
value over the last year and now stands at $4.8 billion with a capital ratio of
.41 percent. One year ago that ratio was
a negative .11 percent.
HUD made the financial announcement as it released its
annual report to Congress. An
independent actuarial report shows that the fund has gone from a negative value
to a growth of $21 billion within the last two years.
In September 2013 FHA had to draw $1.7 billion against
its borrowing authority from the Treasury Department, the first time in its 79
year history it had required such support.
The draw came after the MMI failed to maintain its congressionally
mandated capital-to-loan ratio of 2.0 percent for three consecutive years and an
independent audit estimated it would not return to that ratio until 2017. It now appears that it will reach 2.0 percent
sometime in FY 2016 after regaining an additional $15.1 billion in value over
the remainder of this fiscal year. As
late as December 2013 there were many who predicted the agency would have to
return to Treasury to request more support.
HUD credited the improved financial picture to an aggressive
set of policy actions. Delinquency rates
in the agency's portfolio of guaranteed loans has dropped by 14 percent and
recovery rates improved by 16 percent since last year. Since the housing crisis began FHA has made
significant changes to underwriting standards, loss mitigation policies, and
recovery strategies and has raised insurance premiums.
"This year's
report shows that the fundamentals of the Fund are strong," said HUD Secretary Julian
Castro. "Over the past five years, FHA has taken a number of prudent actions to
restore the Fund's fiscal health. This is positive news for the economy and the
millions of American families that count on FHA."
"Improving the performance of the Fund by $21
billion in two years is good news for the housing market," said Acting FHA
Commissioner Biniam Gebre. "FHA will continue to focus on meeting its
mission of creating responsible access, investing in our economy and preserving
pathways to the middle class. We remain dedicated to giving more hard-working
responsible families the chance to buy a home and not a returning to the days
of reckless lending that caused so much pain for middle-class families and the
economy."
David H. Stevens, President
and CEO of the Mortgage Bankers Association (MBA), said following the release
of the report that the continued improvement in the value of the MMI Fund was
good news for taxpayers and the program, as almost all of the vital metrics,
including delinquencies, foreclosures, and recoveries on property disposition,
continue to improve.
"Maintaining this
trend will require FHA to continue its ongoing work to improve transparency and
certainty around its loan quality assessment methodology, as well as to
re-examine mortgage insurance premiums, both the amount and the structure.
Premiums are currently at an all time high, and FHA needs to find the right
balance so it can meet its mission and further grow its reserves by sustainably
increasing volumes without being adversely selected should only the highest
risk borrowers be willing to pay the high premiums," Stevens said.
