FHA in the black for first time in two years

by MPA18 Nov 2014
The U.S. government’s mortgage insurance fund posted its first positive balance since 2011, according to an independent annual audit released by the Federal Housing Administration (FHA).

“It’s certainly good news that the fund is back in the black,” Julian Castro, secretary of the Department of Housing and Urban Development, said during a briefing on Monday. “It means that the FHA can fulfill its traditional role of providing access to credit.”

The audit found that the FHA’s Mutual Mortgage Insurance (MMI) Fund for single-family programs gained almost $6 billion and is estimated to be around $4.8 billion for the 2014 fiscal year. That’s compared to the negative $1.1 billion reported last fiscal year.

Its capital-reserve ratio, which the FHA is supposed to keep above 2%, grew to 0.41%. While it has improved, it still falls short of last year’s projection.

The agency is required to keep enough cash to cover all projected losses in its $1.1 trillion portfolio. The report estimated that the MMI fund won’t return to the congressionally mandated 2% threshold until 2016.

"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,” said David Stevens, president and CEO of the Mortgage Bankers Association in a statement.

Stevens said premiums are currently at an all-time high, and that the 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.”

Following the housing crisis, FHA took a number of steps including changes to underwriting standards, loss mitigation policies, recovery strategies and premium levels.

“Improving the performance of the fund by $21 billion in two years is good news for the housing market,” said Biniam Gebre, acting FHA Commissioner. "FHA will continue to focus on meeting its mission of creating responsible access, investing in our economy and preserving pathways to the middle class.”

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