Mortgage insurance back in black in latest FHA actuarial report

Aggressive post-crisis policies improve MMI outlook

The Federal Housing Administration released Monday its actuarial report on the Mutual Mortgage Insurance Fund for single-family programs, and it shows the financial health of the regulating agency improved dramatically but that it still has a way to go with its finances.

The FHA boasted a $21 billion improvement since late 2012, after implement a series of financing changes.

The MMI Fund, which handles single-family programs, gained almost $6 billion in value in the past 12 months, printing now at $4.8 billion.

Last year it fell short by more than $1.3 billion.

The MMI capital ratio stands at .41%, well below the 2% considered optimal capital reserves. Improvement in the MMI Fund led to better portfolio performance including delinquency rates dropping 14% and recovery rates improving by 16% since last year.

In the wake of the housing crisis, the FHA undertook a major overhaul of its single-family program, with improved underwriting standards, loss mitigation policies, recovery strategies and premium levels.

“This year’s report shows that the fundamentals of the fund are strong,” said HUD Secretary Juliàn Castro in a statement that accompanied the report. "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."

David Stevens, President and CEO of the Mortgage Bankers Association, issued the following statement

“Today’s report shows a continued improvement in economic value of the MMI Fund, with the fund having improved by $21 billion in the last two years. This trend is 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,” Stevens said.

"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,” Stevens said. “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.”

U.S. Rep. Maxine Waters, D-Calif., ranking minority member of the House Financial Services Committee, said this proves FHA is on the right track.

“Today’s announcement makes clear that FHA is on the right track, and is appropriately recovering from its unprecedented work keeping our housing market afloat during the worst economic crisis in a generation,” Waters. “While the FHA has not made full recovery, it’s important to remember that it is far from bankrupt, holding approximately $40 billion in reserves and continuing to generate revenue.”

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