FHA Issues Actuarial Report To Congress

Posted by Orb Staff on November 16, 2010 No Comments
Categories : Residential Mortgage

The Federal Housing Administration (FHA) has released its annual report to Congress on the financial status of its Mutual Mortgage Insurance (MMI) Fund, FHA's principal insurance account that includes all single-family and reverse-mortgage activity. FHA's study finds that since last year, the capital reserve ratio held steady, insurance claims have declined significantly, and the economic value of FHA's single-family insurance program has grown by more than $1 billion, from $3.6 billion in 2009 to $4.7 billion in 2010.

‘It's clear that FHA is in a stronger position today than we were just one year ago,’ says FHA Commissioner David H. Stevens. ‘While we are not yet completely out of the woods, based on the evidence we're seeing, FHA is weathering the economic storm while helping to create a firm foundation for our nation's recovery.’

The report concludes that under conservative assumptions of future growth of home prices, and without any new policy actions, FHA's capital ratio is expected to approach 2% in 2014 and exceed the statutory requirement in 2015. FHA also states that its capital reserve ratio measures reserves in excess of those needed to cover projected losses over the next 30 years.

The independent actuarial reviews of the MMI Fund estimate FHA's capital reserve ratio to be 0.50% of total insurance-in-force this year – slightly less than the 2009 figure of 0.53%. FHA attributes the difference to the use of more conservative assumptions regarding future house-price growth than were used last year, which it also attributes to an $8.5 billion decrease in economic value. However, FHA states that the decrease was offset by a variety of factors, including an $8.7 billion increase in value due to better credit quality, loan performance and the premium increase implemented earlier this year.

The full report is available online.

SOURCE: FHA

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