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Home appraisal’s ugly history and uncertain future

This is Part I of a deep dive into the home appraisal industry. Today we explore the origins of the appraisal industry and its current lack of diversity.

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Today RealTrends + Tom Ferry announce the 16th annual The Thousand of America's top 1,000 real estate sales and professionals and teams.


FHA business explodes: Reaches capital mandate for first time since 2008

Actuarial report shows MMI Fund at 2.07%, up from 0.41% in 2014

Flying directly in the face of speculation that the 50 basis point-cut of the Federal Housing Administration’s annual mortgage insurance premiums would negatively effect the health of the FHA’s Mutual Mortgage Insurance Fund, the FHA announced Monday that the MMI Fund actually grew significantly in fiscal 2015, reaching its Congressionally mandated threshold of 2% well ahead of schedule.

The FHA’s fiscal year 2014 actuarial report estimated it would reach the Congressional mandated 2% level during fiscal 2016, but the FHA said Monday that its latest independent actuarial analysis shows the MMI Fund’s capital ratio stands at 2.07%, well above the 2014 level of 0.41%.

With the MMI Fund beyond 2%, the FHA’s capital reserves sit above the Congressional mandate for the first time since 2008, the FHA said.

According to the FHA, this is the third consecutive year of economic growth for the MMI Fund, which allows the FHA to expand credit access to qualified borrowers even as the broader housing market continues to recover. 

FHA’s annual report also showed a significant increase in loan volume during fiscal 2015, due largely to a reduction in annual mortgage insurance premium prices announced in January.

In January, the Obama Administration directed, via executive action, that the FHA reduce its annual mortgage insurance premiums by 50 basis points, from 1.35% to 0.85%.

According to the FHA, the economic value of the MMI Fund gained $19 billion in fiscal 2015, driven by “strong actions” to reduce risk, cut losses and improve recoveries.

“FHA is on solid financial footing and positioned to continue playing its vital role in assisting future generations of homeowners,” said HUD Secretary Julián Castro. 

“We’ve taken a number of steps to strengthen the Fund and increase credit access to responsible borrowers,” Castro said. “Today’s report demonstrates that we struck the right balance in responsibly growing the Fund, reducing premiums, and doing what FHA was born to do – allowing hardworking Americans to become homeowners and spurring growth in the housing market as well as the broader economy.”

recent report from the Mortgage Bankers Association showed that after the FHA’s share of purchase mortgage insurance steadily declined from 2010 until this year, the FHA’s share actually began to increase after the Obama administration directed the FHA to institute the cut.

According to the FHA, the decision to reduce annual mortgage insurance premiums by 50 basis points stimulated a 42% increase in total volume including a 27% rise in purchase-loan endorsements. 

The mortgage interest premium reduction also allowed the FHA to expand access to credit by serving 75,000 new borrowers with credit scores of 680 or below.

The FHA’s report also showed that the economic health of the MMI Fund improved significantly in fiscal 2015 with a net value of nearly $24 billion, an increase of $19 billion over fiscal 2014. 

The gain in economic value is the largest one-year increase since fiscal 2012, the FHA said. 

According to the FHA, the MMI Fund’s value increased by $40 billion in the last three fiscal years. This improvement shows tremendous progress, especially considering that the MMI Fund had a negative value of $16.3 billion in fiscal 2012, the FHA said.

The FHA report also showed that the MMI Fund’s improved economic value is attributed FHA’s strong actions to reduce risk and improve loss mitigation.

As a result, serious delinquencies declined 39% and recoveries grew 28% since 2012, the FHA said.

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