Mortgage Insurance Fund Results to Impact Future of Housing

On Wednesday, the Federal Housing Administration (FHA) released its Annual Report to Congress showing the economic condition of the Mutual Mortgage Insurance Fund (MMI) for fiscal year (FY) 2017.

According to the report, the MMI Fund had a total economic net worth of $25.6 billion and the Capital Ratio that remains above the statutory minimum for a third straight year.

Although the MMI Fund remained above its minimum capital level for FY 2017, both the economic net worth and the capital ratio declined from levels reported last year. The FHA noted that the Fund’s economic net worth fell $1.9 billion—while the capital ratio declined from 2.35 percent to 2.09 percent from FY 2016.

The FHA is a critical part of the housing finance system, and according to Lindsey Johnson, U.S. Mortgage Insurers (USMI) President and Executive Director, while there have been calls to reduce FHA insurance premiums, but she believes Wednesday’s report makes it clear that had this happened, the fund would be at 1.76 percent and undercapitalized.

“The FHA should resist calls for significant policy changes, such as reducing the cost of its insurance or canceling the collection of insurance premiums while the FHA insurance protection remains in-force on a mortgage,” Johnson said. “This will help the agency rebuild its financial strength.”

Johnson continued, “Now is the time for the FHA to refocus on its core mission, scaling back from the oversized role it played during the recession so that it can return to serving low-to-moderate income individuals who need the FHA’s 100-percent government-backed loans the most.”

In response to the annual report, Financial Services Committee Chairman Jeb Hensarling (R-Texas) said the declining fiscal condition represents a present danger to taxpayers, homebuyers, and the U.S. economy.

Hensarling urged Congress to have a clearly defined mission to ensure homeownership opportunities for creditworthy first-time homebuyers and low-income families.

“As I did back in January, I once again commend President Trump’s decision to suspend the outgoing Obama administration’s ill-advised and 11th-hour rule change on FHA mortgage insurance premiums,” said Hensarling. “Without this action by President Trump on his first day in office, this annual report confirms that the FHA would be in even worse shape today.”

However, U.S. Department of Housing and Urban Development (HUD) Secretary Ben Carson is ensuring the public that HUD is working to better the fiscal health of the FHA and aid American homeownership opportunities.

“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 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.”

Other key findings from FHA’s 2017 report include:

• The MMI Fund’s Economic Net Worth for FY 2017 is $25.6 billion, down from $27.6 billion for FY 2016.  Economic Net Worth is comprised of Total Capital Resources of $39.7 billion and a negative Cash Flow NPV of $14.1 billion.  Economic Net Worth declined by $1.9 billion from FY 2016.
• FHA’s cumulative Insurance-in-Force (IIF) reached approximately $1.23 trillion at the end of FY 2017, an increase of 4.8 percent from FY 2016.
• FHA endorsed 1,246,440 forward mortgages in FY 2017 (including 882,079 purchase loans) totaling $251 billion in Unpaid Principal Balance (UPB).  
• First-time homebuyers accounted for 725,102 or 82.2 percent of all FHA forward purchase loans.  
• The average loan amount of FHA-insured forward mortgages was $201,337.
• The average borrower’s credit score was 676 compared to 680 in FY 2016.

To view the full report, click here.