HUD Says FHA Fund Solvent and Strengthening

HUD Says FHA Fund Solvent and Strengthening

by | Nov 16, 2011 | News

HUD Says FHA Fund Solvent and Strengthening

Blog Post posted by: Jon Lipe

HUD released today its annual report to Congress on the financial status of the Federal Housing Administration (FHA) Mutual Mortgage Insurance (MMI) Fund, which backs FHA’s single-family and reverse mortgage programs.  In a call with NCSHA and other housing groups, Acting FHA Commissioner Carol Galante said the report concludes that the MMI Fund’s capital ratio remains positive this year at 0.24 percent, short of the 2 percent ratio required by Congress.  The report says the Fund will reach the required ratio by 2014 under expected economic conditions. 

The report also says the economic value of new FHA insurance endorsements in FY 2011 was nearly double that of FY 2010 endorsements.  Losses on loans insured through the first quarter of FY 2009 continue to place a significant strain on the Fund and are expected to reach $26 billion within a few more years.  Though they were prohibited in 2009, the ongoing effect of so-called “seller-funded down payment assistance loans” is still significant.  HUD says the net expected cost of those loans grew by $1.8 billion over the past year to $14.1 billion.  The report says the FY 2010 and FY 2011 books of business are expected to be very profitable, providing significant net revenues to offset losses on earlier books.

In releasing the report, HUD announced that over the past year, FHA has:

  • Served more than 1.2 million households and insured $218 billion in single-family mortgages, bringing the active single-family portfolio to more than $1 trillion.
  • Enabled more than 585,000 families to become homeowners for the first time. This represents 56 percent of all first-time buyers in the nation.
  • Helped more than 362,000 families avoid foreclosure through loss mitigation actions.
  • Helped 440,000 families to refinance their mortgage at lower interest rates, saving households an average of more than $160 per month.
  • Provided access to credit for close to 40 percent of all homebuyers needing mortgages, including 60 percent of all African-American and Hispanic homebuyers.
  • Reduced mortgage payments for 142,000 distressed homeowners through loan modifications. While standard modifications reduced typical payment burdens by 11 percent ($85), FHA HAMP actions reduced average mortgage costs by 24 percent ($218).

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