The mortgage marketplace is doing a better job of serving once underserved borrowers and has been effective at mitigating risk from that effort, according to a review of The Department of Housing and Urban Development's Annual Report to Congress Regarding the Financial Status of the FHA Mutual Mortgage Insurance Fund.
"The continued growth of the Capital Reserve Ratio is welcome news, and indicates that FHA is effectively serving its core mission in the single-family market, providing safe and affordable credit to qualified first time and low-and moderate-income borrowers, while appropriately managing its risk and protecting taxpayers, said Robert Broeksmit, president and CEO of the Mortgage Bankers Association.
An increase in the MMIF capital ratio to 2.76 percent in fiscal year 2018 means the program has proceeded. To move past the above the 2 percent statutory minimum. In addition, the forward book of continued to perform well, with significant increases in key indicators such as serious delinquencies, early payment defaults, claims payments, and loss rates.
"We are glad to see that FHA is closely monitoring the increasing risk in the forward portfolio, indicated by rising debt-to-income ratios, declining credit scores, and the increasing use of downpayment assistance programs,” said Broeksmit. “While current FHA delinquencies are quite low, it is prudent to keep an eye on these trends to ensure the program does not face undue challenges if, and when, the economy and job market cool.”
Nonetheless, it was not a perfect report; Reverse mortgages were a source of concern. The HECM program remains a drain on the fund, continuing a trend that MBA has identified as cause of angst. “Reverse mortgages are an important financial tool that, if used properly, can allow the growing number of retirees to age in place,” said Broeksmit. “MBA applauds the recent steps FHA has taken to stabilize and improve the HECM program, and policymakers should continue considering ways to insulate the forward program from the volatility in the reverse program."
