“FHA’s actuarial report shows that the fund has indisputably found its footing,” says Brown, founder of Investment Properties. “That’s good news for taxpayers, and a reflection of FHA’s sound stewardship. It’s clear from this report that FHA can continue taking responsible steps to manage their risk, even as they take action to make homeownership more affordable for lower- and middle-income buyers.”
The report revealed the MMIF’s “seriously delinquent” rate at a 10-year low, while its overall economic value has grown by $3.8 billion. Last year, the MMIF achieved a 2 percent capital reserve ratio for the first time since the recession—a finding reinforcing the 2.3 percent capital reserve ratio reported for this year.
The report also revealed a 3.2 percent reserve ratio for the “forward” program, which encompasses FHA’s non-Home Equity Conversion Mortgage portfolio. The report would have been stronger, according to NAR, if not for weaknesses in the HECM program.
NAR is encouraging FHA to reduce mortgage insurance premiums to better reflect the risk in the marketplace and fulfill its mission of serving low- and moderate-income borrowers. According to NAR estimates, the 50-basis-point premium cut announced in January 2015 provided an annual savings of $900 for nearly 2 million FHA homeowners. A recent Federal Reserve study also found that that reduction in mortgage insurance premiums had a quick and significant effect on FHA mortgage volume.
NAR is also supporting the elimination of the “life of loan” mortgage insurance, which borrowers must continue to pay until the loan is extinguished or refinanced. Conventional mortgage products, by contrast, generally require mortgage insurance only until a sufficient amount of equity is achieved on the property.
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