WASHINGTON – Nov. 18, 2014 – The U.S. Department of Housing and Urban Development (HUD) released its annual report to Congress on the financial condition of the Federal Housing Administration (FHA) Mutual Mortgage Insurance (MMI) Fund, and it found generally positive results for a federal program that stumbled with foreclosures during the recession.
The independent actuarial report finds that FHA’s Mutual Mortgage Insurance Fund (MMIF) improved going from a negative value to a growth of $21 billion within two years.
In the past year, the Fund gained nearly $6 billion in value. It now stands at $4.8 billion, and the current capital ratio is .41 percent, though still below the Congressionally-mandated 2 percent. According to FHA, better portfolio performance includes a 14 percent drop in delinquency rates and 16 percent improvement in recovery rates.
“This year’s report shows that the fundamentals of the Fund are strong,” says HUD Secretary Juliàn Castro.
National Association of Realtors® (NAR) President Chris Polychron agrees with Castro, but he also issued a statement asking for changes now that the program is on solid financial footing.
“The ongoing decline in delinquencies and stabilizing home values indicate that FHA will stay on track to rebuild its capital reserve fund,” Polychron says. “Now … NAR urges FHA to lower its annual mortgage insurance premiums and eliminate the requirement that mortgage insurance be held for the life of the loan.”
According to NAR, current FHA mortgage insurance premiums make homeownership more difficult.
“NAR estimates that in 2013, nearly 400,000 creditworthy borrowers were priced out of the housing market because of high FHA insurance premiums,” Polychron says. “By lowering its fees, FHA could provide greater access to homeownership for historically underserved groups.”
Polychron says the percent share of first-time buyers using FHA-backed loans shrank from 56 percent to 39 percent over the past four years,.
“In light of this report, NAR believes that Congress should not dramatically change the FHA or redefine its purpose,” adds Polychron. “We will continue our work with FHA to help make the dream of homeownership a reality for millions more Americans.”
FHA was established after the Great Depression to help stabilize the economy and the housing market. When the private market couldn’t or wouldn’t provide access to credit, FHA preserved homeownership pathways for the middle class. During the recent recession, FHA had a nearly five-fold increase in market share.
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