On Monday, Nov. 17, 2014, FHA released its Annual Report to Congress and the FY 2014 Independent Actuarial Assessment of the FHA Mutual Mortgage Insurance Fund. The review shows that the fund has gained $6 billion over the past year and the current economic net worth has improved to a positive $4.8 billion. FHA’s current cash reserves to pay claims total $40 billion. The capital reserve ratio is required to be at or above 2 percent and FHA is expected to meet that obligation by 2016. Improvements can be attributed to:
- Serious delinquency rates for the active portfolio fell from 8.2 percent in FY 2013 to 7.1 percent in FY 2014.
- Recoveries on dispositions have improved by more than 5.5 percent of the loan unpaid balance at default. In particular, the recovery rates for the Distressed Asset Stabilization Program (DASP) improved to 64 percent in FY 2014 from 49 percent in FY 2013.
- FHA made program changes to HECMs, such as lowering principal limit factors, changes to upfront MIP pricing and limits on the types of Fixed Interest Rate mortgages that can be insured through HECM.
2015 NAR President Chris Polychron issued the following statement on behalf of NAR:
“NAR is pleased that the 2014 Actuarial Review of the Federal Housing Administration released today confirms that the Mutual Mortgage Insurance Fund is healthy and continues its positive trajectory. The ongoing decline in delinquencies and stabilizing home values indicate that FHA will stay on track to rebuild its capital reserve fund and ultimately meet the 2 percent excess reserve amount required by Congress.
“Now that the MMI Fund is on a path to recovery, 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. Achieving homeownership has become more difficult with current FHA mortgage insurance premiums.
“NAR estimates that in 2013, nearly 400,000 creditworthy borrowers were priced out of the housing market because of high FHA insurance premiums. By lowering its fees, FHA could provide greater access to homeownership for historically underserved groups. To put it in perspective, over the past four years, the percent share of first-time buyers using FHA-backed loans shrank from 56 percent to 39 percent.
“A shift in policy would also increase the volume of borrowers acquiring FHA-backed loans and contribute to the solvency of the MMI Fund.
“NAR is a strong supporter of the FHA and its vital role in the mortgage marketplace. In light of this report, NAR believes that Congress should not dramatically change the FHA or redefine its purpose. We will continue our work with FHA to help make the dream of homeownership a reality for millions more Americans.”