Insurance rates of all kinds follow what up to this point has been an immutable equation. Rise when risk goes up, fall when risk goes down. Somehow, the Department of Housing and Urban Development (HUD) didn’t get the memo on this and in the process, is punishing the country’s most vulnerable homebuyers and borrowers.
In November of 2019, in HUD’s annual report to Congress on the health of the FHA mortgage insurance program, it was revealed that that the FHA MMI Fund Capital Ratio skyrocketed from 2.78% to 4.84%, a staggering 63% increase from the previous year, resulting in an additional $28 billion added to the insurance fund. With the fund sitting at 4.84, the fund is 142% above the minimum capital requirement mandated by law. It is strange to see the government involved in anything that comes in under budget and ahead of projections.
Couple this good news with the great news that everyone is working with wages rising, values are still creeping up nationally, interest rates are near their historic lows, and FHA mortgage delinquencies have never been lower, and there should be a celebration by all industry stakeholders and buyers of a substantial lowering of the monthly mortgage insurance premium paid by all FHA borrowers. But all we hear is dead silence on the subject coming out of Washington, DC. If it’s not getting lowered now, when will it ever be reduced?