November 16 2010 (Chris Moore)

The Federal Housing Administration (FHA) today released its annual report to Congress on the financial status of its Mutual Mortgage Insurance (MMI) Fund, FHA’s principal insurance account that includes all single-family and reverse mortgage activity and the news was good.

The study found that since last year, the capital reserve ratio held steady, insurance claims declined significantly, and the economic value of FHA’s single-family insurance program grew by more than $1 billion, from $3.6 billion in 2009 to $4.7 billion in 2010.

“It’s clear that FHA is in a stronger position today than we were just one year ago,” said FHA Commissioner David H. Stevens. “While we are not yet completely out of the woods, based on the evidence we’re seeing, FHA is weathering the economic storm while helping to create a firm foundation for our nation’s recovery.”

The report also gave insight as to how much its pre-2009 loans was dragging it down. Loans insured before 2009 are responsible for 70 percent of the expected single family loan losses. Though they are now prohibited, so-called “seller-financed down payment assistance loans” produced $6.6 billion in claims to-date and may ultimately cost FHA $13.6 billion. Without these seller-financed loans, FHA’s capital ratio would be above the congressionally mandated two percent threshold.

Right now the FHA’s capital ratio is around .50 percent, and is expected to near two percent in 2014 and finally exceed the statutory requirement in 2015 based on conservative assumptions on the future growth of home prices and in increase in its holdings value due to better credit quality, loan performance, and the premium increase implemented earlier this year.

Loans insured since 2009 earned $4.8 billion in economic value to the MMI Fund and are estimated to generate $28.3 billion in economic value by 2016.

Also in the report, the FHA has:

• Served more than 1.75 million households by insuring $319 billion in single-family mortgages. This volume was second only to FY 2009.
• Enabled 882,000 families to become homeowners for the first time. This represents one-third of all first-time buyers in the nation.
• Helped more than 450,000 families avoid foreclosure through loss mitigation actions.
• Helped 556,000 families to refinance their mortgage at lower interest rates, saving households an average of more than $140 per month.
• Provided access to credit for close to 40 percent of purchase mortgages including 60 percent of all African-American and Hispanic homebuyers.
• Helped more than 450,000 families avoid foreclosure through loss mitigation actions.

Tags: FHA, mortgages, homeowners, lower interest rates, capital ratio, home prices credit quality, single family mortgages, foreclosure