FHA Insurance Fund Performs Better than Auditors Projections says Report

A report from the Federal Housing Administration shows the Mutual Mortgage Insurance Fund is performing better than previous projections by independent auditors which said total capital resources would decline by approximately $5 billion.

According to FHA’s fourth quarter report to congress, the total capital resources in the MMI fund increased slightly to $33.3 billion during the quarter and by $1.5 billion for all of fiscal year 2010.

Insurance activity for the FHA’s reverse mortgage program increased to 18,484 units during the quarter, up from 15,266 reverse mortgages.  Fiscal year endorsements came in at 78,757, 31 percent lower than fiscal year 2009.

“The decline in FY 2010 followed reductions in equity take-out limits that went into effect for new loan applications effective in October 2009,” said FHA in the report.  “Forecasts of lower levels of house price growth in the longer-term, compared to previous projections, requires HUD to again make changes to assure that HECM does not require taxpayer subsidies.”

For fiscal year 2011, HUD increased the annual mortgage insurance premium for the HECM Standard from 0.50 percent to 1.25 percent.  The agency also introduced the a new low cost reverse mortgage product in October.  “With HECM Saver, the maximum equity take-out limit is considerably lower than it is with the HECM Standard option, which lowers the risk to the MMI Fund,” said FHA.

According to the report, current regulations require that some positive upfront premium be charged for HECM loans, which is why there is the .01% upfront premium for the HECM Saver.

During the quarter, the credit subsidy rate for the HECM program remained at -0.50%.  Loans with negative credit subsidies are expected to produce receipts for the Federal budget.

View a copy of the report here.

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