As required by law, the Federal Housing Administration [1] (FHA) has provided to congress and the public its annual report [2] on the financial status of its Mutual Mortgage Insurance Fund [3] (MMI Fund). The MMI Fund is used to operate the FHA Single Family mortgage insurance programs under the color of the National Housing Act.
The intent behind the report is to show the FHA’s significant role in supporting affordable financing for first-time homebuyers and people of color while also continuing to keep people in their homes who are experiencing residual COVID-19 effects. The report also gives updates on the FHA’s work to support increased housing supply and affordability while reducing barriers to fair and equitable homeownership.
FHA’s achievements in fiscal year 2022 are supported by a strong MMI Fund, as demonstrated by the Fund’s capital ratio of 11.11% as of September 30, 2022.
“I’m so proud of FHA’s work to make homeownership possible for our nation’s underserved households and communities,” said Julia R. Gordon [4], Federal Housing Commissioner. “Behind the bottom-line numbers are some two million individuals and families who were able to achieve homeownership or stay in their homes through hard times thanks to assistance from FHA.”
All-in-all, the FHA has helped more than one million homeowners who were behind on their mortgages to obtain a forbearance or recovery option during the pandemic. In 2022, FHA reduced the number of serious delinquencies—mortgages 90 or more days past due—by almost half, ending with a serious delinquency rate of 4.77% on September 30, 2022. This number had reached more than 11% during the height of the COVID-19 crisis.
The FHA also highlighted its work to reduce barriers to homeownership and increase the housing supply and affordability. This was helped through new FHA policies allowing the use of rental history as a factor in FHA first-time homebuyer mortgage underwriting assessments, revised procedures to deal with any applicant employment gaps, and program modifications to FHA’s property disposition programs to provide priority purchase opportunities for owner-occupant buyers.
Other key facts from the report as highlighted by the FHA include:
As in past years, in fiscal year 2022, FHA again led the industry in its support of first-time homeownership:
- The overwhelming majority of FHA insurance endorsements, some 84% of its total forward purchase mortgage endorsements (678,675 mortgages), were for mortgages made to first-time homebuyers in fiscal year 2022.
- The share of FHA’s fiscal year 2022 total purchase mortgage endorsements on mortgages for first-time homebuyers was 37 percentage points higher than that of other participants in the U.S. housing market.
Supporting homeownership for communities of color is a core element of FHA’s mission and a significant part of FHA’s business:
- In fiscal year 2022, FHA provided an insurance endorsement on mortgages for 284,807 self-identified individuals and families of color, 29% of its total forward mortgage insurance endorsements.
- FHA served three times as many Black borrowers by share of its total forward mortgage insurance endorsements than the rest of the market, and two times as many Hispanic borrowers by share than the rest of the market, according to 2021 Home Mortgage Disclosure Act (HMDA) data, the latest such data available.
FHA’s ongoing focus on helping borrowers struggling financially because of COVID-19 yielded substantial results in fiscal year 2022:
- From the start of the pandemic through September 30, 2022, more than one million borrowers with FHA-insured mortgages took advantage of loss mitigation home retention options or were in the process of obtaining loss mitigation through their mortgage servicer.
- More than 566,000 homeowners received a COVID-19 Recovery Standalone Partial Claim through their mortgage servicer throughout fiscal year 2022. The Standalone Partial Claim allows borrowers to place missed mortgage payments in a no-interest subordinate lien that they do not need to repay until they sell the property or refinance their first mortgage.
- FHA’s other loss mitigation home retention options have helped almost 445,000 borrowers to regain their financial footing and avoid foreclosure over the course of fiscal year 2022.
- As of September 30, 2022, FHA’s serious delinquency rate, the percentage of mortgages 90 or more days delinquent, was 4.77%. This is a decrease of four percentage points in just one year and a reduction of more than seven percentage points from the peak of 11.90% experienced in November 2020.
The strong performance of the MMI Fund in fiscal year 2022 positions FHA well to pursue new opportunities through its programs:
- The overall Capital Ratio of the Fund increased by three percentage points over the previous fiscal year, ending at 11.11% as of September 30, 2022.
- FHA’s forward mortgage portfolio achieved a stand-alone capital ratio of 10.47% as of September 30, 2022, a 2.48 percentage point increase over fiscal year 2021.
- The FHA Home Equity Conversion Mortgage (HECM) portfolio’s stand-alone capital ratio stood at 22.77% as of September 30, 2022, a 16.69 percentage point increase from fiscal year 2021, due in part to the permanent allocation to the HECM portfolio of $1.7 billion in appropriated funds received by FHA in fiscal year 2013.
- The MMI Fund has $147.7 billion in MMI Capital, a $41.2 billion increase from fiscal year 2021.
MBA's President and CEO Bob Broeksmit, CMB, issued the following statement after the FHA released its annual report to Congress:
“Today’s report reflects a very healthy FHA program, with continued strengthening of the FHA Mutual Mortgage Insurance Fund, lower delinquency levels, and fewer borrowers in pandemic-related forbearance.”
“Thanks to prudent risk management over the past several years by HUD and FHA lenders, the Fund’s capital reserve ratio is more than five times the statutory minimum reserve ratio and is well positioned to withstand an economic slowdown. We commend HUD and mortgage servicers for their ongoing work together during the pandemic to help homeowners successfully exit forbearance programs and stay in their homes.”
“Given FHA’s healthy financial position, MBA continues to believe that HUD should make FHA loans more affordable by reducing mortgage insurance premiums as soon as budgetary opportunities allow. This move would help offset the impact of higher mortgage rates and improve the purchasing power for many prospective first-time homebuyers, minority buyers, and those with low and moderate incomes.”
“With further slowing in the housing market expected in the months ahead, MBA will work with HUD and FHA leadership to ensure FHA can safely and sustainably perform its countercyclical role in the market, particularly for first-time homebuyers and underserved communities.”
Click here [2] to view the 129-page annual report here.