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FHA loans back on solid ground

WASHINGTON – Nov. 17, 2015 – According to a Federal Housing Administration (FHA) review released yesterday, FHA has strongly rebounded, achieved greater overall health, and seen increased access to safe mortgage financing as cuts to FHA’s annual mortgage insurance premium have taken hold.
The U.S. Department of Housing and Urban Development (HUD), which oversees the FHA program, announced the improvement in its annual report to Congress on FHA’s Mutual Mortgage Insurance (MMI) Fund. The MMI Fund’s capital ratio now stands at 2.07 percent – the first time since 2008 that FHA’s reserve ratio exceeded a congressionally required 2 percent threshold. It’s MMI’s third year for growth.
FHA’s annual report also notes a significant increase in loan volume during fiscal year 2015, due largely to the reduction in annual mortgage insurance premium prices.
The National Association of Realtors® (NAR) “advocated strongly for cutting FHA annual mortgage insurance premiums, and those policies are now paying dividends for both taxpayers and homeowners,” says 2015 NAR President Chris Polychron. “Today’s announcement shows that the Mutual Mortgage Insurance Fund’s health has solidly improved, offering strong incentive for FHA to take further action to support homeownership in America.”
Polychron says NAR will review the actuarial assessment “but we believe these results show a positive trajectory for the mortgage insurance fund and a clear path for FHA to remain above its federally-mandated 2 percent capital reserve ratio … We believe that as delinquencies continue to decline and home prices continue to rise, the MMI’s success will only continue. With that in mind, FHA should look in the very near term towards additional policy changes to encourage homeownership.”
Major findings of FHA’s annual report
The MMI Fund’s capital ratio reached Congress’ two percent requirement a 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 fiscal year 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 to 75,000 new borrowers with credit scores of 680 or below.
The economic health of the MMI Fund improved significantly with a net value of nearly $24 billion – an increase of $19 billion year-over-year and the largest one-year increase since 2012 when the fund had a negative value of $16.3 billion.
 Serious delinquencies declined 39 percent and recoveries grew 28 percent since 2012.
© 2015 Florida Realtors®
Source: Florida Realtors Feed

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