WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) today released its annual report to Congress on the financial condition of the Federal Housing Administration’s Mutual Mortgage Insurance (MMI) Fund. The independent actuarial analysis shows the MMI Fund’s capital ratio stands at 2.07 percent—the first time since 2008 that FHA’s reserve ratio exceeded the congressionally required 2 percent threshold. The economic value of the MMI Fund gained $19 billion in Fiscal Year 2015, driven by strong actions to reduce risk, cut losses and improve recoveries.
This is the third consecutive year of economic growth for the MMI Fund, allowing FHA to expand credit access to qualified borrowers even as the broader housing market continues to recover. FHA’s annual report also notes a significant increase in loan volume during FY 2015, due largely to a reduction in annual mortgage insurance premium prices announced in January. Read a comprehensive summary of the report released today.
“FHA is on solid financial footing and positioned to continue playing its vital role in assisting future generations of homeowners,” said HUD Secretary Julián Castro. “We’ve taken a number of steps to strengthen the Fund and increase credit access to responsible borrowers. Today’s report demonstrates that we struck the right balance in responsibly growing the Fund, reducing premiums, and doing what FHA was born to do – allowing hardworking Americans to become homeowners and spurring growth in the housing market as well as the broader economy.”
Major Findings of FHA’s Annual Report
- The MMI Fund’s capital ratio is now above Congress’ two percent requirement, a full year earlier than last year’s projection. FHA’s independent actuary reports the Fund’s capital ratio is 2.07 percent, up from 0.41 percent in FY 2014.
- FHA’s decision in January to reduce annual mortgage insurance premiums (MIP) by a half a percent stimulated a 42 percent increase in total volume including a 27 percent hike in purchase-loan endorsements. The MIP reduction also allowed FHA to expand access to credit by serving 75,000 new borrowers with credit scores of 680 or below.
- The economic health of the MMI Fund improved significantly in FY 2015 with a net value of nearly $24 billion, an increase of $19 billion over FY 2014. This gain in economic value is the largest one-year increase since FY 2012. In the past three consecutive fiscal years, the Fund’s value increased by $40 billion. This improvement shows tremendous progress, especially considering that the Fund had a negative value of $16.3 billion in FY 2012.
- The Fund’s improved economic value is attributed FHA’s strong actions to reduce risk and improve loss mitigation. As a result, serious delinquencies declined 39 percent and recoveries grew 28 percent since 2012.
The FHA’s Role in the Housing Market
The FHA was established in response to the failure of the banking system during the Great Depression to help stabilize the economy and the housing market. When the private market couldn’t or wouldn’t provide access to credit, FHA was there, investing in our economy and preserving pathways to the middle class – just as it was designed to do. During this most recent crisis, FHA experienced a nearly five-fold increase in market share enabling it to provide critical access to credit when most needed. Today, the number of single-family loan endorsements has declined to pre-crisis levels. This decline indicates the housing market and economy are beginning to recover.
Since 1934, FHA helped approximately 40 million Americans purchase or refinance homes—nearly 7 million of those just during the most recent crisis.