More than a year after reporting a shortfall of $16.3
billion in the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance (MMI) fund, HUD announced significant improvements in the
agency’s financial situation—though the fund remains in the red.
An
actuarial report released Friday shows FHA’s insurance fund for
single-family home loans has regained $15 billion dollars in value over
the last year, bringing it to -$1.3 billion dollars and a capital ratio
of -0.11 percent. By law, the federal insurer is supposed to maintain a
capital reserve ratio of 2 percent, a goal it expects to meet in 2015.
As of now, the agency maintains more than $48 billion in liquid assets to pay expected claims.
"What
is clear from the independent actuarial report is that the aggressive
steps we have taken have made FHA stronger and put it on a sustainable
path to fulfill its dual mission of supporting access to homeownership
for underserved and low-wealth borrowers as well as supporting and
stabilizing the housing market,” said HUD Secretary Shaun Donovan.
"We
look to the future and remain committed to continuing our progress to
strengthen the MMI Fund so that ladders of opportunity are available to
all Americans for generations to come,” he added.
The
actuarial report points to a number of factors driving the improvement
in FHA’s finances, including declines in early payment defaults—to their
lowest levels in seven
years, thanks to improved
underwriting in more recent books of business—and drops in serious
delinquency and foreclosure rates as a result of enhanced loss
mitigation efforts.
To keep up the momentum, FHA says
it plans to continue pushing for further legislative changes that would
allow the agency to seek indemnification from all classes of approved
lenders, grant the authority to terminate approval on a national—rather
than regional—basis, and facilitate servicing by specialty servicers.
Though FHA still has some ground to make up, Friday’s news was taken as a largely positive sign by industry groups.
"Today’s
report, while recognizing FHA’s current shortfall, shows clear
improvement over last year and is a sign that the MMI Fund is headed in
the right direction and could soon be positive,” said David Stevens,
president and CEO of the Mortgage Bankers Association (MBA), adding that
with a tighter credit environment on the horizon, "policymakers must
continue to protect and improve the MMI fund in order to ensure that FHA
can serve its critical mission in the single family market.”
On
the other hand, FHA’s critics are likely to be less than impressed—in
particular Rep. Jeb Hensarling (R-Texas), who has proposed legislation
to reform FHA and drive down the government’s presence in the market.
In
a November op-ed for the Washington Times, Hensarling criticized FHA
Commissioner Carol Galante’s moderate approach to revising the agency’s
practices, saying FHA has "refused to make full use of the tools it has
at its disposal, such as raising premiums to their maximum or increasing
minimum down payments.”
His criticism carries heavy
weight in light of the fact that FHA just recently had to take its
first-ever taxpayer-funded bailout.
"Americans deserve
and demand a healthy economy. We cannot borrower, spend or bail out our
way to prosperity,” he goes on to say in the Washington Times piece. "If
government continues to dominate the housing market, we may never have a
truly healthy and sustainable economy.”
Source: DSNews.com
