Homebuyers who need affordable mortgages that permit a low down payment and flexible guidelines often choose loans insured by the Federal Housing Administration.
The popularity of FHA loans has brought renewed scrutiny in recent years to the health of the FHA Mutual Mortgage Insurance Fund, which backs those loans.
In the last year, the fund gained $15 billion in value, but it still stands in a negative position of another $1.3 billion, according to the latest report to Congress, released in December by the Department of Housing and Urban Development, the government agency that houses the FHA. The report is required annually.
The fund is back on track
According to the report, the fund is now expected to return to its required 2 percent capital reserve ratio in 2015, two years sooner than was projected in 2012. The current capital ratio is negative 0.11 percent. The FHA also maintains more than $48 billion in liquid assets to pay expected claims, the report said.
Where the FHA is improving
The report attributed the improvement to these and other factors:
- Lower levels of early payment delinquency rates
- Declines in serious delinquency rates
- Declines in foreclosures starts
- Tighter credit standards
- Higher mortgage-insurance premiums
- Expanded use of loss mitigation and foreclosure alternatives
FHA gets ‘aggressive’
In a statement, HUD Secretary Shaun Donovan said the report showed “aggressive steps” have been taken to strengthen the FHA and put it on a sustainable path to fulfill its dual mission of supporting access to homeownership and stabilizing the housing market.
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FHA Commissioner Carol Galante added that the FHA will “make every effort to maintain this positive momentum while simultaneously ensuring qualified borrowers in under-served markets can responsibly access mortgage credit.”
“Nationwide. foreclosure rates are down, unemployment continues to fall and home prices are rising at their fastest rate in seven years,” the FHA stated. “Despite the signs of recovery and pre-crisis level loan volumes, FHA’s market share remains higher than normal. This is a reflection of a substantial decrease in the total size of the mortgage market.”
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The FHA was established during the Great Depression to help stabilize the U.S. economy and housing market. During the recent housing crisis, the agency experienced a nearly five-fold increase in its share of the mortgage market.
Source: MSN Real Estate