On November 15, 2018, the Federal Housing Administration (FHA) released its Annual Report to Congress on the financial health of the FHA Mutual Mortgage Insurance Fund for Fiscal Year (FY) 2018. The Fund's capital reserve ratio was 2.76 percent, an impressive increase from 2.18 percent for FY 2017. The total capital reserves for FY 2018 are $34.86 billion, a $8.12 billion increase from FY 2017. This is the fourth year in a row that the Fund exceeded the statutory requirement to maintain at least a two percent capital reserve ratio.
The FHA forward program is strong and healthy. Per the report, the capital reserve ratio for FHA forward mortgages was 3.93 percent, up from 3.33 percent for FY 2017, demonstrating the continued strength of loan quality in the forward portfolio. Serious delinquency rates continue to decline, dropping from a rate of 4.32 percent for FY 2017 to 4.11 percent for FY 2018.
The Home Equity Conversion Mortgage (HECM) program continues to negatively affect the Fund. The HECM FY 2018 ratio was a negative 18.83 percent, demonstrating an increase in claims from FY 2017 when the ratio was a negative 18.3 percent. However, FHA recently made changes affecting the HECM mortgage insurance premiums and appraisal requirements, that are intended to stabilize the program going forward.
2019 NAR President John Smaby issued the following statement on behalf of NAR:
"The Federal Housing Administration’s 2018 Annual Report to Congress on the health of the Mutual Mortgage Insurance Fund shows positive signs for America's housing market and overall economy. FHA’s financial health is clearly strong, as the Fund’s Congressionally mandated capital reserve ratio remains above the statutory minimum for a fourth consecutive year. The National Association of Realtors® is particularly pleased to see an increase of over $8 billion to FHA’s net economic worth, boosting the total to over $34 billion.
Under the leadership of FHA Commissioner Brian Montgomery, the FHA continues its mission of facilitating safe and affordable mortgage options for qualified borrowers, in particular first-time and minority homebuyers. FHA endorsed over one million forward mortgages in FY 2018, and given the strength of the forward program NAR believes it is time for the Administration to revisit the requirement that FHA borrowers must pay premiums for the life of the loan.
Overall, it is clear that taxpayers are continuing to benefit from an FHA that is committed to its core mission. While the Home Equity Conversion Mortgage program, which again had a negative ratio, continues to bring down the overall health of the Fund, NAR is hopeful that recent actions by the FHA to reduce the volatility of the HECM portfolio will continue to stabilize the program. The report confirms the agency is appropriately managing risks while facilitating affordable housing opportunities for lower- and middle-income Americans.”