The capital reserve of the MMI Fund is now 5x larger than required
The U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) reported a solid year of financial performance for the Mutual Mortgage Insurance (MMI) Fund, which covers FHA’s Title II single-family mortgage insurance programs.
FHA’s MMI Fund achieved a capital reserve ratio of 11.47% as of September 30, an annualized increase of approximately 0.9% from 2023according to FHA’s Annual Report to Congress released Friday. The report marked the ninth year in a row that the ratio exceeded the legal minimum of 2%.
The forward book of business performance recorded a standalone capital ratio of 10.88%, again a slight increase of 0.68% compared to a year ago.
“The financial performance of the term mortgage portfolio remained strong over the past financial year,” the report said.
FHA also detailed that the percentage of new homebuyers using FHA insurance is 82.64% of total registered FHA term mortgage purchases, roughly comparable to the same figure in 2023.
This is despite “numerous challenges in the mortgage and housing markets that began in FY 2023 and continued through most of FY 2024,” the report said.
The overall figure is still down slightly from the 2022 level of 82.97%, but remains solid despite industry-wide challenges through much of 2023 and 2024. In announcing the release of the report, the FHA emphasized that this shows that more than 790,000 Americans were supported by the agency’s homeownership programs.
Adrianne Todman, the head of HUD, called the Biden administration’s work an effort to “expand access to homeownership,” thanks to “historic reforms to help hundreds of thousands of Americans buy and keep homes,” despite ongoing affordability and inventory challenges.
“The exceptional team of officials at FHA and within this administration continued to deliver a world-class mortgage program to support the nation’s homebuyers in fiscal year 2024,” said FHA Commissioner Julia Gordon.
“Through our work, we have demonstrated that FHA can facilitate homeownership and wealth-building opportunities for hundreds of thousands of households and provide relief to homeowners facing hardship while maintaining a financially sound mutual mortgage insurance fund.”
The Community Home Lenders of America (CHLA) praised the Fund’s performance in a statement, highlighting last year’s reduction in the Annual Mortgage Insurance Premium (MIP).
“The FHA report demonstrates the effectiveness of reducing annual FHA premiums by 30 basis points by February 2023, and we reiterate our call for the FHA to find a way to end the term of loan premiums, which are currently overcharging borrowers,” the group said.
Additional, Association of Mortgage Bankers (MBA) President and CEO Bob Broeksmit attributed the Fund’s strength to “quality assurances and effective risk management and loss mitigation efforts by HUD, FHA lenders and mortgage servicers.” But the association and its members remain concerned about affordability given the continued high rate environment.
“At 11.47% the [MMI] The fund amounts to more than five times the statutory minimum reserve ratio,” Broeksmit said. “While it is prudent to have a healthy cushion above the 2% minimum reserve, qualified borrowers should not be charged higher mortgage insurance premiums (MIP) than necessary.”
Borrowers could experience “meaningful payment relief as FHA eliminates the loan term requirement and reintroduces a reasonable reduction in the MIP,” Broeksmit added. Additionally, more “program improvements to boost housing supply and affordability” would be beneficial, with changes to the 203(k) renovation loan program this year being an example.
In addition to pursuing more program improvements to increase housing supply and affordability, such as this year’s 203(k) program updates, borrowers would see a significant payment reduction from FHA, eliminating the term of the loan premium requirement and once again providing a reasonable reduction of the MIP is implemented.
Editor’s note: Find performance coverage for the Home Equity Conversion Mortgage (HECM) business book on HousingWire’s Reverse mortgage daily.
