FHA: MMI Fund remains healthy despite mortgage headwinds

The forward mortgage portfolio inside the MMI Fund saw a slight drop in its capital reserve ratio, but remains well above its statutory minimum

The U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) managed another solid year of financial performance for the Mutual Mortgage Insurance (MMI) Fund, covering FHA’s Title II Single Family Mortgage Insurance programs.

The FHA’s MMI Fund achieved a capital reserve ratio of 10.51% as of Sept. 30, a year-over-year drop of 0.6% from 2022, according to FHA’s Annual Report to Congress released on Wednesday. The report marked the eighth consecutive year the ratio has exceeded its 2% statutory minimum.

The performance of the forward book of business posted a stand-alone capital ratio of 10.20%, another slight decrease of 0.27% compared to a year ago.

“Despite the tick down, the ratio is still more than five times the Congressionally mandated level of two percent,” the report found.

FHA also detailed that the percentage of first-time homebuyers using FHA insurance was more than 82% of total recorded FHA forward-mortgage purchase endorsements.

“[M]ore than four out of every five borrowers with FHA-insured mortgages are first-time homebuyers, while in the market as a whole, fewer than half of mortgages are made to first-time homebuyers,” according to the report.

That figure still saw a slight reduction from 2022’s level of 82.97%, but remains solid despite industry-wide volume reductions seen this year.

In an exclusive statement to HousingWire, HUD Secretary Marcia Fudge said that current FHA and HUD leaders are serving as responsible stewards of the MMI Fund.

“Today’s report shows that thoughtful and responsive policies can expand homeownership and address long-standing inequities while maintaining a well-performing Mutual Mortgage Insurance Fund,” Fudge said. “In 2023, we helped thousands of Americans become homebuyers, promoting equity and fairness while bolstering our entire economy.”

Industry players reacting to the news cited the early 2023 cutoff of the FHA mortgage insurance premium (MIP) by 30 basis points as a contributing factor to the strength of the book of business this year.

“The FHA program is healthy, with a high capital reserve ratio and delinquency levels that are now lower than before the pandemic,” said Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA).

“We applaud the tremendous efforts of HUD, FHA lenders, and mortgage servicers in managing risk, originating quality loans, and helping distressed homeowners exit forbearance and stay in their homes. The Fund’s capital reserve ratio is far above the statutory minimum reserve ratio and is well positioned to withstand any economic slowdown.”

MBA hopes for additional MIP action, Broeksmit said.

“FHA’s move to lower mortgage insurance premiums (MIP) earlier this year improved the purchasing power for many homebuyers, but affordability challenges persist because of low housing inventory and high mortgage rates and home prices,” he said. “Further action on the MIP, such as eliminating the life of loan premium requirement, should be considered to provide payment relief to FHA borrowers.”

The performance was also lauded by Scott Olson, executive director of Community Home Lenders of America (CHLA).

“CHLA is thrilled by FHA’s continued financial strength, as evidenced by today’s FHA Actuarial Report,” he said. “In light of FHA’s financial strength, just as relief from excessive student debt burdens has been a priority, the Administration should make relief from excessive homeownership mortgage cost burdens a priority by ending the FHA Life of Loan premium policy.”

Editor’s note: Find performance coverage for the Home Equity Conversion Mortgage (HECM) book of business on Reverse Mortgage Daily.

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