FHA Report Finds Health of Mortgage Insurance Fund Improving

The economic value of the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund (MMIF) improved in fiscal year (FY) 2018, according to FHA’s 2018 Report to Congress.

The MMIF’s economic value rose to nearly $34.9 billion in FY 2018, up $8 billion over the previous year. Its capital ratio for FY 2018 was 2.76 percent, up over half a percent from FY 2017. This is the fourth consecutive year that the MMIF’s capital ratio exceeded the 2 percent minimum.

In a message included in the report, FHA Commissioner Brian Montgomery noted that the MMIF’s capital ratio is above the minimum by "a thin margin." In a call with media to discuss the report’s findings, Montgomery said that, while he is confident that the MMIF is on sound footing, FHA is not in a position to lower insurance premiums for program borrowers.

Similar to recent years, the report suggests that the biggest threat to MMIF’s economic health is potential losses realized through its Home Equity Conversion Mortgage Loan (HECM) program. In FY 2018, FHA’s HECM portfolio had a capital ratio of negative 18.83 percent and a negative economic net worth of $13.36 billion, both slight improvements over FY 2017. In contrast, FHA’s single-family purchase mortgage portfolio had capital ratio of 3.93 percent and a positive economic value of $46.8 billion. The report details several changes FHA has implemented to the HECM program in 2017 and 2018 designed to improve its performance, and pledges that FHA will continue to monitor the program closely.

FHA endorsed just over one million home purchase loans in FY 2018, 776,000 of which financed home purchases (the rest were refinancings). 83 percent of FHA’s home purchase loans went to first-time home buyers. Just over a third went to minority borrowers. As in latest year, the average FHA borrower’s credit score in FY 2018 dropped, from 676 to 670.

According to data from NCSHA’s Factbook, 55 percent of HFA single-family program loans in 2016 were insured by FHA.

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