4 minute read
The U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) reported a solid year of financial performance for the Mutual Mortgage Insurance (MMI) Fund, covering FHA’s Title II Single Family Mortgage Insurance programs.
The FHA’s MMI Fund achieved a capital reserve ratio of 11.47% as of Sept. 30, a year-over-year increase of roughly 0.9% from 2023, according to FHA’s Annual Report to Congress released on Friday. The report marked the ninth consecutive year the ratio has exceeded its 2% statutory minimum.
The performance of the forward book of business posted a stand-alone capital ratio of 10.88%, another slight increase of 0.68% compared to a year ago.
“The financial performance of the forward mortgage portfolio remained strong this past fiscal year,” the report said.
FHA also detailed that the percentage of first-time homebuyers using FHA insurance was 82.64% of total recorded FHA forward-mortgage purchase endorsements, roughly on par with the same figure in 2023.
This is despite “numerous challenges in the mortgage and housing markets that began in FY 2023 and continued during the majority of FY 2024,” according to the report.
The total figure still saw a slight reduction when compared to 2022’s level of 82.97%, but remains solid despite industry-wide challenges faced throughout much of 2023 and 2024. In the announcement of the report’s publication, FHA emphasized that it shows more than 790,000 Americans were supported by the agency’s homeownership programs.
Adrianne Todman, the head of HUD, credited the work of the Biden administration as working to “have expanded access to homeownership,” due to “historic reforms to help hundreds of thousands of Americans buy and keep a home” in spite of ongoing affordability and inventory challenges.
“The exceptional team of public servants at FHA and throughout this administration continued to deliver a world-class mortgage program to support the nation’s homebuyers in fiscal year 2024,” said FHA Commissioner Julia Gordon.
“Through our work, we have demonstrated that FHA can facilitate homeownership and wealth-building opportunities for hundreds of thousands of households and provide support for homeowners facing hardships while maintaining a financially sound Mutual Mortgage Insurance Fund.”
The Community Home Lenders of America (CHLA) lauded the Fund’s performance in a statement, particularly calling out the cut last year to the annual mortgage insurance premium (MIP).
“The FHA report demonstrates the effectiveness of the February 2023 cut of 30 basis points in annual FHA premiums, and we reiterate our call for FHA to find a way to end life of loan premiums, which currently overcharge borrowers,” the group said
Additionally, Mortgage Bankers Association (MBA) president and CEO Bob Broeksmit attributed the strength of the Fund to “quality underwriting and effective risk management and loss mitigation efforts by HUD, FHA lenders, and mortgage servicers.” But the association and its membership remain concerned about affordability given the continued elevated rate environment.
“At 11.47%, the [MMI] Fund is more than five times the statutory minimum reserve ratio,” Broeksmit said. “While it is sensible to have a healthy cushion above the 2% minimum reserve, qualified borrowers should not be charged higher mortgage insurance premiums (MIP) than necessary.”
Borrowers could experience “meaningful payment relief from FHA eliminating its life of loan premium requirement and making another reasonable cut to the MIP,” Broeksmit added. Additionally, more “program enhancements to boost housing supply and affordability” would be beneficial, holding up changes to the 203(k) renovation loan program this year as an example.
In addition to pursuing more program enhancements to boost housing supply and affordability, such as this year’s 203(k) program updates, borrowers would see meaningful payment relief from FHA eliminating its life of loan premium requirement and making another reasonable cut to the MIP.
Editor’s note: Find performance coverage for the Home Equity Conversion Mortgage (HECM) book of business on HousingWire’s Reverse Mortgage Daily.
But let us focus on the HECM portion. The Insurance-In-Force for the HECM side of the MMIF went from $65,936 billion down to $65,152 billion. So the minimum reserve requirement dropped by just $16 million, making the new minimum reserve requirement $1,303 billion from $1,319 billion. At $15,961 billion, the reserve as of 9/30/2024 was 12.25 times the required minimum.
Dr. Ben Carson has recently recommended that MIP be increased. Why? The reserve to cover maximum loss from HECMs is almost 25% of the maximum loss without any consideration for the collateral associated with active HECMs. Some might call that overkill.
The plight of senior homeowners has not improved in the last ten years so rather than adjusting or refunding MIP, why not increase PLFs so that more senior homeowners can enjoy the benefits of more cash flow in retirement? As to the RMF fiasco, there should be regulatory review of transfers of HECM portfolio and any associated debt. At a bare minimum there should be a thorough audit by HUD/GNMA of lender due diligence on all proposed transfers of HECM portfolios between lenders.
James,
“The plight of senior homeowners has not improved in the last ten years so rather than adjusting or refunding MIP, why not increase PLFs so that more senior homeowners can enjoy the benefits of more cash flow in retirement?”
Boomers are the wealthiest generation in the history of mankind according to a new study by Allianz. Lets not further disadvantage young people who’s median first-time homebuyer has reached an all-time high age of 38 years old, three years older than in July 2023, according to the National Association.