Congress Told FHA Fund is Strong, Reverse Mortgages Improving

In a hearing on Thursday before the House Financial Services Committee, Edward L. Golding, Principal Deputy Assistant Secretary of the Department of Housing and Urban Development (HUD) said that the value of the Federal Housing Administration’s Mutual Mortgage Insurance (MMI) Fund has improved by $19 billion in the last year.  The Fund fell into negative territory during the housing crisis, battered by poor performance of its guarantee portfolio.

Golding said the Fund increased from $4.8 billion in FY 2014 to $23.8 billion in the most recent year, a total of $40 billion in growth since 2012.  The Fund, which is required by Congress to maintain a capital ratio of 2.0 percent, has improved since 2012 from a negative 1.44 percent to a positive 2.07 percent.  Further, the Independent Actuary’s 2015 review predicts that the Fund will finish 2016 with a ratio of 2.77 percent.

Golding said the underlying fundamentals of the FHA portfolio are strong and show positive performance in credit quality, reduced delinquencies, and higher recoveries on distressed assets.  The early payment delinquency (EPD) rates are typical of the better credit quality of new business.  The EPD give an early warning of problems, measuring the rate at which loans experience delinquencies in their first 90 days.  The EDP rates for FY2010 through FY2015 vintage loans are less than 20 percent of those for the 2007 and 2008 vintages.