FHA insurance fund to see slower growth

by MPA03 Feb 2015
U.S. President Barack Obama’s proposed budget shows that the Federal Housing Administration’s (FHA) insurance fund will gain at a slower pace over the next two years.

Amid the announcement of FHA mortgage insurance premium cuts, the White House predicted the insurance fund will grow by more than $7 billion per year during the next two years after gaining $21 billion in value over the prior two years combined, according to the Wall Street Journal.

In January, Obama addressed new housing initiatives, including lowering FHA rates, winding down Fannie and Freddie and continuing to crack down on shoddy lending practices. The cut drops the FHA mortgage insurance premium from 1.35% to 0.85%.

Republicans have said premium cuts should be off the table because the agency’s insurance fund remains below the legally required level of 2%. House Financial Services Committee Chairman Jeb Hensarling said in December that “a broke FHA is a broken FHA.”

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

Obama's proposed budget also includes a bump in the Department of Housing and Urban Development’s (HUD) current funding levels in its 2016 fiscal year. HUD is requesting an increase of nearly $4 billion, which would amount to $49.3 billion.

“HUD is the Department of Opportunity and the President’s budget proposal is a blueprint for greater opportunity for all Americans,” Secretary Julián Castro said in a statement. “By increasing our department’s funding level by nearly $4 billion over current levels, the President’s budget helps us continue our progress toward achieving our mission to promote homeownership, support community development – including making neighborhoods more resilient from natural disasters – and expand access to affordable housing for all.”
 

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