FHA Reserves Rise Past 2%.
Byline: David Morrison
The Federal Housing Administration had enough money in its reserves for the first time since 2008, the U.S. Department of Housing and Urban Development revealed Monday.
HUD delivered the news in its annual report to Congress on the financial condition of the FHA's Mutual Mortgage Insurance Fund. The department reported an independent analysis found the fund's capital ratio stood at 2.07%. The FHA is legislatively required to maintain a capital ratio of at least 2.00%.
The ratio measured how much in reserves, as a proportion of its loan guarantees, the FHA would have on hand after covering expected losses.
FHA reported its insurance fund's net worth at the end of September was $23.8 billion, $19 billon more than the $4.8 billion it had in the third quarter of 2014. The reserve ratio this time last year was 0.41%, the department reported.
Speaking at a Monday press conference, U.S. Secretary of Housing and Urban Development Julian Castro and HUD Principal Deputy Assistant Secretary Edward Golding credited a previous cut in the FHA's insurance premiums for sparking a surge in its loan volume and the financial gains.
Partially in response to pressure from lenders and fair housing organizations, the FHA lowered the premium it charged most of its borrowers in January to 0.85% from 1.35%, a move the Obama administration said would enable more first time buyers to enter the market.
Golding said 75,000 first time borrowers with credit scores lower than 680 had entered the market since the premium cut. He also observed the FHA rebuilt its reserves a full year before independent auditors forecasted it would do so.
The revelation that the FHA's reserves were higher than legislatively mandated drew questions about whether it might cut premiums further. Castro told reporters the department considered discussing any further premium cuts premature.
"We only just got the report today," Castro said, adding "It's premature to talk about any kind of additional changes."
The department also reported the FHA had a reserve ratio of around 3% in 2008, but in 2013 it needed a $1.7 billion taxpayer bailout to cover losses. In response, the FHA raised the fees it charges borrowers several times from less than 0.6% to 1.35% by 2013.