FHA Lending Now Financially Strong – Enough to Ease Fees?
NEW YORK – The Federal Housing Administration (FHA) may be at its best level financially since before the housing crisis, but that hasn’t translated into reduced premiums for FHA borrowers. The FHA’s capital levels through its Mutual Mortgage Insurance Fund (MMIF) have hit its highest point since 2007, according to its 2019 Annual Report to Congress released last Thursday.
Congress mandates that FHA’s fund maintain at least a 2% ratio in reserves. While the FHA fund dropped below that level for a while during the housing crisis and was almost bankrupt, it’s been above 2% for the past five consecutive years. One year ago, FHA’s Mutual Mortgage Insurance Fund Capital Ratio was 2.76%; this year it’s reached 4.84%.
The fund’s financial strength allows the FHA to continue to meet the needs of first-time home buyers, minorities and those underserved by the current market, says Vince Malta, president of the National Association of Realtors® (NAR).
“However, the report also indicates current FHA buyers are paying premiums higher than necessary to cover taxpayer risks,” Malta adds. “As a result, NAR urges the FHA to consider reducing premiums and eliminating the life-of-loan policy, ensuring this critical market sector is not paying unnecessary fees to fund separate federal programs. Moving forward, we will work closely with the FHA to ensure the program facilitates access to mortgage credit while appropriately managing the risk to taxpayers.”
Despite the uptick in the MMIF, the FHA has not made any change to reducing its “life of loan” policy, which since 2013 has required homeowners to pay premiums longer than similar homeowners with other types of mortgages would traditionally be able to cancel a private-mortgage-insurance policy because of rising home equity.
“When do we think we’re at a sufficient level to make any adjustments to premiums?” FHA Commissioner Brian Montgomery said on a call with the media this week. “I don’t think we’re there yet, but it’s something we’re looking at overall.”
The FHA’s market share of home purchase mortgages fell to 11.4% in 2019 from 12.3% the year prior; it was 18% in 2009. The average loan amount the FHA insured toward mortgages in 2019 was $216,695 – a 5% increase from fiscal year 2018.
Source: National Association of REALTORS® and “FHA Capital Level Is the Highest Since 2007,” HousingWire (Nov. 14, 2019)
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