Stop Overcharging FHA Borrowers to Subsidize Reverse Mortgage Risks

It will apparently surprise some in Washington that, had the FHA not used the single-family mortgage insurance program to subsidize Homeowners Equity Conversion Mortgage, it would already have surpassed the 2% minimum statutory capital requirement mandated by Congress.

The Federal Housing Administration has made net transfers of $4.3 billion since fiscal year 2010 to the HECM financing account “to cover the increase in expected losses” in the reverse mortgage program.

Instead of confirming that the FHA’s flagship program has weathered the worst financial crisis since the Great Depression at no expense to the American taxpayer, the actuarial review of the Mutual Mortgage Insurance Fund for fiscal year 2015 offers the misleading impression that the forward portfolio’s all-important capital ratio is still below 2%.