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Good News for Housing and Consumers From FHA

by devteam November 18th, 2014 | Share

Despite dire predictions from many quarters thernFederal Housing Administration’s (FHA’s) Mutual Mortgage Insurance Fund (MMIF)rnhas returned to solvency.  And it did itrna full three years ahead of the best estimates back in 2012.  The Department of Housing and UrbanrnDevelopment (HUD) said on Monday that the Fund has gained nearly $6 billion inrnvalue over the last year and now stands at $4.8 billion with a capital ratio ofrn.41 percent.  One year ago that ratio wasrna negative .11 percent.</p

HUD made the financial announcement as it released itsrnannual report to Congress.  Anrnindependent actuarial report shows that the fund has gone from a negative valuernto a growth of $21 billion within the last two years. </p

In September 2013 FHA had to draw $1.7 billion againstrnits borrowing authority from the Treasury Department, the first time in its 79rnyear history it had required such support. rnThe draw came after the MMI failed to maintain its congressionallyrnmandated capital-to-loan ratio of 2.0 percent for three consecutive years and anrnindependent audit estimated it would not return to that ratio until 2017.  It now appears that it will reach 2.0 percentrnsometime in FY 2016 after regaining an additional $15.1 billion in value overrnthe remainder of this fiscal year.  Asrnlate as December 2013 there were many who predicted the agency would have tornreturn to Treasury to request more support.</p

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HUD credited the improved financial picture to an aggressivernset of policy actions.  Delinquency ratesrnin the agency’s portfolio of guaranteed loans has dropped by 14 percent andrnrecovery rates improved by 16 percent since last year.  Since the housing crisis began FHA has madernsignificant changes to underwriting standards, loss mitigation policies, andrnrecovery strategies and has raised insurance premiums.  </p

“This year’srnreport shows that the fundamentals of the Fund are strong,” said HUD Secretary JulianrnCastro. “Over the past five years, FHA has taken a number of prudent actions tornrestore the Fund’s fiscal health. This is positive news for the economy and thernmillions of American families that count on FHA.”</p

 “Improving the performance of the Fund by $21rnbillion in two years is good news for the housing market,” said Acting FHArnCommissioner Biniam Gebre. “FHA will continue to focus on meeting itsrnmission of creating responsible access, investing in our economy and preservingrnpathways to the middle class. We remain dedicated to giving more hard-workingrnresponsible families the chance to buy a home and not a returning to the daysrnof reckless lending that caused so much pain for middle-class families and therneconomy.”</p

David H. Stevens, Presidentrnand CEO of the Mortgage Bankers Association (MBA), said following the releasernof the report that the continued improvement in the value of the MMI Fund wasrngood news for taxpayers and the program, as almost all of the vital metrics,rnincluding delinquencies, foreclosures, and recoveries on property disposition,rncontinue to improve.</p

“Maintaining thisrntrend will require FHA to continue its ongoing work to improve transparency andrncertainty around its loan quality assessment methodology, as well as tornre-examine mortgage insurance premiums, both the amount and the structure.rnPremiums are currently at an all time high, and FHA needs to find the rightrnbalance so it can meet its mission and further grow its reserves by sustainablyrnincreasing volumes without being adversely selected should only the highestrnrisk borrowers be willing to pay the high premiums,” Stevens said.

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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