FHA’s MMI Fund Propelled by Gains in Home Prices

The U.S. Department of Housing & Urban Development (HUD) has released its fiscal year (FY) 2021 report to Congress on the financial health of the Federal Housing Administration (FHA) Mutual Mortgage Insurance (MMI) Fund, which supports FHA’s Single Family mortgage insurance programs, including all forward mortgage purchase and refinance transactions, as well as mortgages insured under the Home Equity Conversion Mortgage (HECM) reverse mortgage program.

The FY 2021 Report found that the MMI Fund increased its overall Capital Ratio, ending the fiscal year at 8.03%, an increase of 1.93 percentage points over FY 2020.

For the first time since 2015, the HECM reverse mortgage program has a strong positive ratio, primarily due to strong national home price appreciation.

“The strength of the fund is a promising sign and solidifies the important role FHA fulfills in making homeownership a reality for first-time homebuyers and those with lower incomes.” said HUD Secretary Marcia L. Fudge. “This year, our Administration took unprecedented steps to deliver relief to those devastated by the pandemic. Managing the strong fiscal health and performance of the FHA program is a top priority, and I am encouraged to see the MMI Fund remain resilient through the events of the past year. Looking ahead, we will ensure FHA is well-positioned to provide broad and equitable access to homeownership, especially for those who have been historically underserved in the mortgage market.”

Highlights of the FY 2021 Report include:

• As of September 30, 2021, FHA had active insurance on more than 7.8 million single-family forward and reverse mortgages, with a total unpaid principal balance of more than $1.2 trillion.
• The percentage of first-time homebuyers using FHA insurance reached a new high of 84.61 percent of total FHA forward mortgage purchase endorsements in FY 2021. The share of mortgages insured by FHA to minority borrowers reached almost 42% of all FHA forward mortgage insurance endorsements in FY 2021. FHA served double the percentage of Black and Hispanic borrowers, when compared to those served through mortgage originations by the rest of the housing market this past fiscal year.
• The overall Capital Ratio for FY 2021 was 8.03%, an increase of 1.93 percentage points over FY 2020’s 6.10% capital ratio. The Capital Ratio is one indicator of the MMI Fund’s financial health and includes both the FHA-insured single family forward and reverse mortgage portfolios.
• FHA’s forward mortgage portfolio achieved solid performance with a stand-alone capital ratio of 7.99% as of September 30, 2021, an increase of 1.68 percentage points over the previous year.
• HECM reverse mortgage portfolio saw a significant improvement in its valuation. It has a stand-alone capital ratio of 6.08% as of September 30, 2021, compared to a negative 0.78 percent capital ratio from the previous year.

“With the combined Fund capital ratio now at 8.03%, it is appropriate for HUD to expeditiously examine reductions in FHA mortgage insurance premiums, which have been at their current levels for nearly seven years,” said Bob Broeksmit, CMB, President and CEO of the Mortgage Bankers Association (MBA). “HUD should focus on pricing changes that have the greatest impact on affordability and sustainability for borrowers, such as reductions to the annual premiums, while being mindful of the current delinquency levels in the FHA portfolio and the elevated number of borrowers who remain in forbearance.”

Click here to review HUD’s FY 2021 Annual Financial Report to Congress.