The U.S. Department of Housing and Urban Development stated in their yearly report to Congress on Monday that the Federal Housing Administration's Mutual Mortgage Insurance Fund has increased by $21 billion from 2012, presently it has now an economic value of $4.8 billion with a current capital ratio of 0.41 percent. The fund also boasts a gain of more than $6 billion last year. The department associates the Fund's remarkable growth to policy changes made by FHA. This means that the department would have enough cash to protect the funds from projected losses if the agency had to suddenly stop backing new mortgages.
The FHA has taken some steps after the 2008 housing market crisis which includes changes to underwriting standards, loss mitigation policies, recovery strategies, and premium levels all these have contributed to the Fund's growth in the last two years. The Department of Housing and Urban Development also said in the report that with enough funds they will be focusing on facilitating access for creditworthy families. FHA stated on the report that they will follow through and continue to put into effect the policies that have contributed to the Fund's growth and the appropriate expansion of mortgage credit access.
The Department of Housing and Urban Development stated on the report that the FHA had benefited from a drop in foreclosures, stricter standards, and higher premiums charged to borrowers to cover the government mortgage insurance. The housing market crisis that accompanied the 2007-09 recession hit the FHA's finances hard, that force them to take $1.7 billion from the U.S. Treasury Department to comply with rules saying that its reserves must be large enough to cover all projected losses over the next 30 years.
"We have successfully weathered the storm," said HUD Secretary Julian Castro.
For the agency to maintain the growth they will need to continue and improve transparency and confidence throughout their loan quality assessment methodology. They will also need to check thoroughly the mortgage insurance premiums, both the amount and the structure.
However, despite this good news the FHA fund's capital ratio remains below the legal requirement. The capital ratio measures its net worth against its obligations, it is a key capital-reserve requirement. The report said it would not meet the minimum until 2016. In the 2013's annual audit projected the fund would return to the legal minimum in 2015.
In 2013, the Government Accountability Office said that the federal role in housing finance was €high risk,€ citing FHA and its failure to meet the capital-reserve-ratio requirement, among other issues.
The FHA increased their share of the market when the housing bubble burst, that tripled their loan portfolio and now valued at $1 trillion.
Since the FHA offers low down-payment requirements (as little as 3.5% of the purchase price), first-time homeowners and lower and moderate-income borrowers can easily qualify for prime loans.
The FHA has taken some steps after the 2008 housing market crisis which includes changes to underwriting standards, loss mitigation policies, recovery strategies, and premium levels all these have contributed to the Fund's growth in the last two years. The Department of Housing and Urban Development also said in the report that with enough funds they will be focusing on facilitating access for creditworthy families. FHA stated on the report that they will follow through and continue to put into effect the policies that have contributed to the Fund's growth and the appropriate expansion of mortgage credit access.
The Department of Housing and Urban Development stated on the report that the FHA had benefited from a drop in foreclosures, stricter standards, and higher premiums charged to borrowers to cover the government mortgage insurance. The housing market crisis that accompanied the 2007-09 recession hit the FHA's finances hard, that force them to take $1.7 billion from the U.S. Treasury Department to comply with rules saying that its reserves must be large enough to cover all projected losses over the next 30 years.
"We have successfully weathered the storm," said HUD Secretary Julian Castro.
For the agency to maintain the growth they will need to continue and improve transparency and confidence throughout their loan quality assessment methodology. They will also need to check thoroughly the mortgage insurance premiums, both the amount and the structure.
However, despite this good news the FHA fund's capital ratio remains below the legal requirement. The capital ratio measures its net worth against its obligations, it is a key capital-reserve requirement. The report said it would not meet the minimum until 2016. In the 2013's annual audit projected the fund would return to the legal minimum in 2015.
In 2013, the Government Accountability Office said that the federal role in housing finance was €high risk,€ citing FHA and its failure to meet the capital-reserve-ratio requirement, among other issues.
The FHA increased their share of the market when the housing bubble burst, that tripled their loan portfolio and now valued at $1 trillion.
Since the FHA offers low down-payment requirements (as little as 3.5% of the purchase price), first-time homeowners and lower and moderate-income borrowers can easily qualify for prime loans.