2021-11-15 20:29:06

Flush with capital, FHA resists calls to cut insurance premiums

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American Banker
By Hannah Lang

WASHINGTON A key indicator of the finances of the Federal Housing Administration reached a new high for the fiscal year ending Sept. 30, thanks to strong home price appreciation in spite of the ongoing COVID-19 pandemic.

But despite a 14-year high of 8.03% for the capital ratio of the agency's mutual mortgage insurance fund stoked by the recovery of the reverse mortgage program the FHA did not signal immediate plans in its annual actuarial report to cut insurance premiums. The FHA is taking a cautionary approach to pricing in light of delinquencies and uncertainty about loans in forbearance, officials said.

The effects of the pandemic on the FHA Single Family insurance portfolio continues to unfold, with over 660,000 loans that remain delinquent, said Marcia Fudge, secretary of the Department of Housing and Urban Development, in a foreword for the report.

The MMIF's capital ratio was 31.6% higher than a year earlier. Meanwhile, the FHA's home equity conversion mortgage program which tracks reverse mortgage performance and has historically been a drag on the agencys finances improved markedly. Its capital ratio reached 6.08%, up significantly from the 2020 level of negative-0.78%.

Managing the strong fiscal health and performance of the FHA program is a top priority, and I am encouraged to see the MMI Fund remain resilient through the events of the past year, said Fudge in a press release.

However, even though senior HUD officials said they were pleased with the strength of the MMIF on a call with reporters, they stressed that the capital ratios did not convey the full picture.

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