FHA Capital Reserves Above Statutory Minimum for Third Straight Year

Filed in Housing Finance by on November 15, 2017 0 Comments

The Federal Housing Administration (FHA) today released its annual report to Congress that shows the agency’s capital reserve ratio fell by $1.9 billion to a total economic net worth of $25.6 billion.

However, for the third straight year, FHA’s reserve ratio has exceeded the congressionally mandated 2% threshold. FHA’s Mutual Mortgage Insurance Fund now stands at 2.09% of the loans back stopped by the agency, vs. the 2.35% level from a year ago.

HUD said that one reason why FHA reserves fell this year was due to a loss in FHA’s Home Equity Conversion Mortgage (HECM), or reverse mortgage program that allows seniors to take out loans against their homes. The 2017 HECM portfolio posted a negative capital ratio of 19.84% and a negative economic net worth of $14.5 billion.

Meanwhile, FHA’s forward mortgage portfolio, which consists of its main program geared toward first-time home buyers, showed a marked improvement. FHA’s forward mortgages in fiscal 2017 posted a positive economic net worth of $38.4 billion, contributing $4.2 billion to the to the agency’s Mutual Mortgage Insurance Fund. Excluding HECMs, FHA’s fiscal 2017 forward mortgages have a capital ratio of 3.33%, well above what Congress requires.

“The fiscal health of FHA demands our constant attention and vigilance to ensure we can continue providing sustainable homeownership opportunities to working families without exposing taxpayers to excessive, risk,” said HUD Secretary Ben Carson. “Our duty is clear – we must make certain FHA remains financially viable so future generations can build wealth and climb the economic ladder of success.”

NAHB has been urging FHA to cut its annual mortgage insurance premiums as the agency’s Mutual Mortgage Insurance Fund showed signs of firming in recent years. Even though the fund’s Single Family Forward Portfolio program posted a material gain, it is unlikely the agency will move in the near term to push for a fee reduction because FHA’s overall reserves fell back.

Read HUD’s press release.

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

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