On Friday, December 13, FHA released its Annual Report to Congress and the FY 2013 Independent Actuarial Assessment of the FHA Mutual Mortgage Insurance Fund. The review shows that the fund has gained $15 billion over the past year and the current economic net worth has improved to a negative $1.3 billion. FHA’s current cash reserves total $48 billion. This does not cover 30 years’ worth of reserves as required by the statute, but is almost double what FHA had in reserves in 2012. The capital reserve ratio is required to be at or above 2 percent and FHA is expected to meet that obligation by 2015. Improvements can be attributed to:
- Early Payment Defaults are at their lowest levels in seven years
- An 18 percent drop in serious delinquency rates and a 20 percent drop in foreclosures starts are a result of enhanced loss mitigations policies.
- FHA REO recovery rates are up 28 percent from last December, and this figure does not account for the future impact of FHA’s new streamlined short sale program which was launched in July.
- FHA has tightened credit standards, increased premiums, eliminated mortgage insurance cancellation options for most loans and expanded use of loss mitigation
2014 NAR President Steve Brown issued the following statement on behalf of NAR:
“NAR is a strong supporter of the Federal Housing Administration and its vital role in the mortgage marketplace.
The 2013 Actuarial Review released today shows that FHA is on a positive trajectory to rebuild its capital reserve fund and meet the congressionally required 2 percent excess reserve amount by 2015. These promising gains are the result of strong leadership and a commitment to policies that balance risk with the FHA mission, to make mortgage insurance available to qualified home buyers.
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 of Americans.”