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FHA Mortgage Insurance Claims, Payments Lower than Projected

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The dollar amount and number of mortgage insurance claims at the Federal Housing Administration (FHA) so far in its fiscal year 2010 fall short of projections made by the independent actuarial study for fiscal year 2009. Total capital resources in the FHA's single-family mutual mortgage insurance (MMI) fund rose to $33.1bn as of June, from $32.2bn at the end of March, according to the quarterly report to Congress authored by FHA chief risk officer Bob Ryan. The FY10 at the FHA, which insures approved lenders against default-related losses, ends in October 2010. Actual mortgage prepayments to-date for this fiscal year (October 2009 through June 2010) are less than half the forecast by the actuary: The number and dollar amount of actual insurance claim payments to-date is much lower than was projected last year, although the trend remains upward. Loss rates on claim actions are somewhat higher than projected, however, coming in at 58% over the projected 55%. FHA received 19,310 fewer insurance claims and paid $3.7bn less so far in its fiscal year 2010 than was projected by the actuarial review. The quarterly report noted several possible reasons for the outcome, including stability in home prices and a decline in the number of new 90-day delinquencies in the most recent quarter compared with the year-ago period. Additionally, FHA servicers are aggressively pursuing loss mitigation efforts, the report said. Some states could be experiencing processing delays due to the large numbers of foreclosures. The quality of loans coming into the FHA insurance portfolio improved due to credit restrictions in the conventional market and to new underwriting standards set by FHA. The average credit score on current insurance endorsements has risen from 634 in 2007 to nearly 700. Write to Diana Golobay.

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