FHA report to Congress shows capital ratio remains above legal minimum

The United States Department of Housing and Urban Development (HUD) released its fiscal 2021 report to Congress on the financial health of the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund (MMI). In addition to focusing on providing relief options to homeowners financially affected by the COVID-19 pandemic, the FHA continued to fulfill its mission of enabling home ownership for first-time buyers. home, low- and moderate-income homebuyers, and households of color.

The MMI Fund supports the FHA single-family mortgage insurance programs, including all term mortgage purchase and refinancing transactions, as well as mortgages insured under the Home Equity Reverse Mortgage Program. Mortgage Conversion (HECM). The report shows that the MMI fund increased its overall capital ratio, ending the year at 8.03%, an increase of 1.93 percentage point from the previous year.

For the first time since 2015, the HECM Reverse Mortgage Program has a strongly positive ratio, mainly due to the strong appreciation in home prices nationwide. As the recovery from the pandemic continues, the fund remains well positioned to withstand future economic events and bear the consequences of pandemic-induced delinquencies that remain unresolved or are severely delinquent.

“The strength of the fund is a promising sign and reinforces the important role the FHA plays in making homeownership a reality for first-time buyers and low-income people,” said Marcia L. Fudge, secretary of the US Department of Housing and Urban Development. “This year, our administration has taken unprecedented action to bring relief to those devastated by the pandemic. “

“Managing the financial health and strong performance of the FHA program is a top priority, and I am encouraged to see the MMI Fund remain resilient despite the events of the past year,” adds Fudge. “Going forward, we will ensure that the FHA is well positioned to provide broad and fair access to homeownership, especially for those who have been historically underserved in the mortgage market. “

As of September 30, 2021, the FHA had active insurance on more than 7.8 million single-family term and reverse mortgages, with a total outstanding principal balance of more than $ 1.2 trillion.

The percentage of first-time home buyers using FHA insurance reached a new high of 84.73% of total FHA term mortgage purchase riders in fiscal 2021. Share of insured mortgages by FHA to minority borrowers reached nearly 42% of all FHA term mortgage insurance endorsements in FY 2021. FHA served double the percentage of black and Hispanic borrowers compared to those served through mortgage arrangements by the rest of the housing market during the past financial year.

The overall capital ratio for fiscal year 2021 was 8.03%, an increase of 1.93 percentage points over the capital ratio of 6.10% in fiscal 2020. The capital ratio is a Indicator of the financial health of the MMI fund and includes both FHA-insured single-family term and reverse mortgage portfolios.

“The continued strengthening of the FHA Mutual Mortgage Insurance Fund is a welcome development that highlights the strong financial stewardship of the Fund by HUD and other stakeholders, including lenders,” said Bob Broeksmit, CMB, President and Chief from the management of the Mortgage Bankers Association. “A healthy FHA program is needed to ensure the wide availability of sustainable mortgages to low and moderate income households, minority borrowers, first-time homebuyers and other historically underserved communities. “

The FHA term mortgage portfolio performed strongly with a stand-alone capital ratio of 7.99% as of September 30, 2021, an increase of 1.68 percentage points from the previous year.

“With the Combined Fund’s capital ratio now at 8.03%, it is appropriate for HUD to quickly review the FHA mortgage insurance premium reductions, which have been at their current levels for nearly seven years,” Broeksmit continues. “HUD should focus on the price changes that have the most impact on affordability and sustainability for borrowers, such as reductions in annual premiums, while being mindful of current delinquency levels in the debt portfolio. FHA and the high number of borrowers who remain in forbearance. “

The Home Equity Conversion Mortgage (HECM) reverse mortgage portfolio saw a significant improvement in valuation. It has an autonomous capital ratio of 6.08% as of September 30, 2021, compared to a negative capital ratio of 0.78% the previous year.

Sallie R. Loera