FHA Capital Reserves Hit 12-Year High

Filed in Housing Finance by on November 14, 2019 0 Comments
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The Federal Housing Administration (FHA) today released its annual report to Congress that shows the agency’s capital reserve ratio grew by more than $27.5 billion in fiscal 2019 to a total economic net worth of $62.38 billion.

In a sign that the housing recovery continues to make gains, the independent actuarial analysis shows that for the fifth straight year, FHA’s reserve ratio of its Mutual Mortgage Insurance Fund (MMI fund) has exceeded the congressionally mandated 2% threshold. The capital reserve ratio soared to a 12-year high of 4.84% this year from 2.76% in 2018.

“The financial health of FHA’s single-family insurance fund is as sound as it has been in over a decade,” HUD Secretary Ben Carson said in a press release.

The MMI fund’s growth was fueled by the Single Family Forward Portfolio program, which posted a capital ratio of 5.44% and a positive economic net worth of $66.6 billion.

These gains were partially offset by losses in the volatile reverse mortgage portfolio, which posted a negative capital ratio of 9.22% and was valued at minus $5 billion. However, FHA Commissioner Brian Montgomery noted, “The improvements we’ve begun to put in place in the last two years to stem the losses of the reverse mortgage portfolio, aided by favorable economic conditions, are contributing to some improvements in our reverse mortgage portfolio.”

The report noted that the FHA mortgage insurance program continues to serve as an important facilitator of nationwide mortgage credit availability and access to homeownership, particularly for first-time buyers, but that FHA must continue to monitor emerging risks, such as borrowers with high debt-to-income ratios and the use of downpayment assistance programs.

Read HUD’s press release.

For more information, contact Curtis Milton at 800-368-5242 x8597.

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