The Federal Housing Finance Agency (FHA) had to be
bailed out by the U.S. Treasury during the financial crisis after its Mutual
Mortgage Insurance Fund was nearly depleted. Congress has long mandated a 2.0 percent ratio
in its fund, but the agency’s 2011 annual report reported the fund was down to 0.24
percent of its balance of guaranteed loans. In its annual report this November
FHA reported the FY2019 capital ratio of the fund was 4.85 percent.
is a notable recovery, but even more so when compared to the ratio in FY2018,
2.76 percent. Both the forward portfolio with insurance on $1.2 trillion
of mortgages and the reverse mortgage portfolio with insurance on $64 billion
showed large improvements
Institute (UI) analysts Laurie Goodman and Edward Goldman took a deeper look at
what was behind this dramatic increase in a recent blog post in UI’s Urban
The MMI fund’s
net worth for the forward portfolio increased from $46.8 billion to $66.6
billion in one year, giving it a capital ratio of 5.44 percent compared to 3.93
percent in 2018, a 1.51-point increase. These gains far outstripped those in recent
years; the fund had a ratio of 3.33 in 2017 and 3.11 percent in 2016.
The UI analysts say this dramatic $19.8
billion one-year gain in FY2019 was driven by two factors: a $10.2 billion
reduction in the estimate of the net present value (NPV) of future losses, and a
$9.2 billion improvement in capital resources.
They say they believe…