Weiner Brodsky Kider PC

FHA recently released its 2018 Annual Report to Congress regarding the economic condition of its Mutual Mortgage Insurance Fund (MMI Fund).  The health of the fund is of particular importance because it supports FHA’s single-family mortgage insurance programs, including its forward mortgage purchase and refinance transactions, and its HECM-insured mortgages (i.e., its reverse mortgage program).

This year’s report, like the previous year’s report, separately identifies standalone capital ratios for FHA’s forward and reverse mortgage portfolios, as well as portfolio stress-testing based on historical scenarios.

Among the many issues and statistics identified, the Annual Report included the following regarding Fiscal Year 2018:

  • At the end of 2018, the MMI Fund had an overall economic net worth of $34.86 billion. Also, the MMI Fund exceeded its congressionally-mandated capital reserve ratio minimum of 2% for the fourth year in a row.  The current overall capital ratio is 2.76% (an increase over the 2.18% capital ratio in 2017).
    • FHA’s 2018 forward mortgage portfolio has a positive capital ratio of 3.93% and a positive economic net worth of $46.81 billion.
    • FHA’s 2018 HECM portfolio has a negative capital ratio of 18.83% and a negative economic net worth of $13.63 billion.
  • FHA’s cumulative insurance-in-force reached $1.26 trillion of unpaid principal balance of insured mortgages.
  • FHA endorsed more than one million forward mortgages in 2018 (the majority of which were purchase loans) totaling just over $209 billion in unpaid principal balance, with minority borrowers accounting for nearly 33.8% of all such loans, low- to moderate-income borrowers accounting for about 57.4% of all such loans, and first-time homebuyers accounting for about 82.7% of all FHA forward mortgage purchase loans.
  • FHA continues to monitor various credit risks to its forward mortgage portfolio on new endorsements, such as the average borrower debt-to-income (DTI) ratios (increased), average borrower credit scores (decreased), and share of purchase mortgages with some form of downpayment assistance (DPA) (increased).
  • The volume of HECM loans decreased by nearly 7,000 endorsements compared to last year, and both the average maximum claim amount and total claims paid increased from last year.
  • For the eighth year in a row, non-depository institutions increased their market share of total FHA mortgages endorsed.

In discussing FHA’s reverse mortgage portfolio, the Annual Report noted that FHA has implemented a number of changes to strengthen its HECM program and will continue to monitor its performance.

HUD’s press release is available here.

The 2018 Annual Report is available here.