Tags: FHA | profit | insurance fund

FHA Financial Picture Improves, But Pitfalls Remain

By    |   Tuesday, 18 November 2014 12:56 PM

For the first time since 2011, the Federal Housing Administration (FHA) is expected to turn a profit – although barely.

According to an independent annual audit issued Monday, the FHA’s insurance fund was worth $4.8 billion at the end of September, up from negative $1.1 billion the previous fiscal year.

Although its capital reserve ratio grew to 0.41 percent, that figure is about one-third of the 1.2 percent the agency had projected, and well below the 2 percent ratio Congress requires the FHA to maintain.

Moreover, the report found that the ratio won’t reach the 2 percent target again until 2016 – a year later than had been projected.

Last year, the FHA’s reserves grew so low that it required $1.7 billion in taxpayer money to cover its losses.

Officials with the federal Department of Housing and Urban Development (HUD), which oversees the FHA, said the fundamentals of the FHA’s mortgage program were sound and that its financial condition was improving.

HUD officials blamed much of the surprisingly slow growth to the FHA’s reverse-mortgage program – which dropped sharply in terms of economic value, The Wall Street Journal reported.

The slow recovery of the housing market is hampering the FHA’s efforts to attract more business, as are its annual premiums for borrowers, which have been increased five times since 2010. While the fees have helped the FHA bolster its cash reserves, the National Association of Realtors complains they have become so expensive that they drove hundreds of thousands of homebuyers out of the market last year.

The FHA could lose more customers to the mortgage giants Freddie Mac and Fannie Mae, which are planning to lower their down-payment requirements from 5 percent to 3.5 percent, making them more competitive with the FHA, which supports loans with down payments as low as 3 percent, The Washington Post reported.

HUD officials have not said whether they plan to lower the down-payment fees.   

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For the first time since 2011, the Federal Housing Administration (FHA) is expected to turn a profit – although barely.
FHA, profit, insurance fund
Tuesday, 18 November 2014 12:56 PM
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