FHA Reports on Delinquency, Credit Access in Report to Congress

The Federal Housing Administration (FHA) has issued its annual report to Congress which details the work of its single-family mortgage insurance programs in fiscal year 2023, and the performance of the FHA Mutual Mortgage Insurance Fund (MMI Fund), which supports that work.

The Annual Report to Congress Regarding the Financial Status of the Federal Housing Administration Mutual Mortgage Insurance Fund for Fiscal Year 2023, found that, despite challenges in the housing market, FHA facilitated access to mortgage credit for more than 765,000 homebuyers and homeowners, including more than 33,000 seniors who obtained a Home Equity Conversion Mortgage (HECM) during the fiscal year.

“The challenges of today’s housing market can make buying a home seem out-of-reach for many American families,” said HUD Secretary Marcia L. Fudge. “I am pleased to report that in 2023, despite these difficulties, HUD and the Federal Housing Administration remained a stabilizing force for, and a leader in, supporting wealth-building opportunities for first-time homebuyers, low- and moderate-income borrowers, and families of color.”

The report to Congress shows that FHA maintains a strong, well-capitalized insurance fund. As of September 30, 2023, the MMI Fund maintained an overall capital ratio of 10.51%. This represents a slight decrease of only 0.6 percentage points from the previous year. The total capital in the MMI Fund actually increased by $3.6 billion, reaching in excess of $145 billion by the end of the fiscal year, compared to fiscal year 2022. Additionally, FHA’s serious delinquency rate, the percentage of mortgages in its portfolio that are 90 or more days delinquent, was 3.93% at the end of fiscal year 2023, similar to the rate prior to the onset of the COVID-19 pandemic.

“I’m proud that FHA delivered real solutions this past fiscal year, including a reduction in our mortgage insurance premiums and policy and programmatic changes that expanded access to affordable mortgage credit,” said Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon. “Fiscal year 2023 was a difficult year for homebuyers and the professionals who serve them, and FHA’s exceptional team worked hard to support underserved borrowers and communities, as well as our business partners in the mortgage and real estate sector.”

Highlights of the report include:

• FHA insured a total of 732,319 forward mortgages during fiscal year 2023.
• A significant number of seniors benefited from FHA-insured financing, with 32,963 obtaining FHA-insured Home Equity Conversion Mortgages (HECMs) in fiscal year 2023.
• The report found that 82.21% of FHA-insured forward purchase transactions (478,234 mortgages) went to first-time homebuyers in fiscal year 2023, surpassing other market participants by 34 percentage points.
• In fiscal year 2023, 30.63% of FHA-insured forward mortgages (224,304 mortgages) were for borrowers of color. Notably, 15.45% were for Hispanic borrowers, and 12.69% for Black borrowers. In calendar year 2022, FHA’s percentage of mortgages to Black or Hispanic borrowers exceeded the market average by 26 percentage points.
• As of September 30, 2023, FHA’s serious delinquency rate dropped to 3.93%, marking a significant reduction of 7.97 percentage points from the peak in November 2020.
• Despite a slight decrease of 0.60 percentage points in the overall Capital Ratio (10.51%), the Mutual Mortgage Insurance (MMI) Fund remains strong, as the standalone capital ratio of the forward mortgage portfolio stood at 10.20%, and the FHA HECM portfolio maintained a stand-alone capital ratio of 16.72%.
• FHA’s insured portfolio comprised over 7.5 million mortgages at the end of fiscal year 2023, emphasizing its substantial role in the housing market.

“The FHA program is healthy, with a high capital reserve ratio and delinquency levels that are now lower than before the pandemic. We applaud the tremendous efforts of HUD, FHA lenders, and mortgage servicers in managing risk, originating quality loans, and helping distressed homeowners exit forbearance and stay in their homes," said Bob Broeksmit, CMB, President and CEO of the Mortgage Bankers Association (MBA). “The Fund’s capital reserve ratio is far above the statutory minimum reserve ratio and is well positioned to withstand any economic slowdown."

DSNews had a chance to sit down and chat with Assistant Secretary for Housing and Federal Housing Commissioner Gordon about the report, and what advice she would offer to those hesitant to enter the housing market in a time of high rates, high prices, and low inventory.

“My best advice is to enter the housing market when you personally feel ready to buy a home,” said Gordon. “That means you have saved the money needed to save, and not just enough to pay for a down payment and get into a home, but to be prepared to take on the responsibilities of homeownership. That means you'll have to not only pay for taxes and insurance, but you'll also have to pay for maintenance of the property, you'll have to furnish the property, etc.”

Gordon continued, “For people who are ready financially, and are ready, in terms of the stage of their life, where they plan to be in a particular geography for a while. I would not advise people to try to time the market. From a financial perspective, that's the time to start looking for homes, and begin to talk to a housing counselor to get advice on the process, before you go ahead and sign up with any agent or for a particular loan. Getting that that advice—that impartial advice—is really important.”

In the FHA’s report, Gordon noted that amid the pandemic, approximately two million borrowers with FHA-insured mortgages utilized forbearance and/or loss mitigation options through September 30, 2023.

“Our serious delinquency rate has actually returned to pre-pandemic levels. That's from a high close to 12% at the height of the pandemic, and COVID forbearances, and now it’s back under 4%,” added Gordon. “I believe that what FHA and the other government mortgage channels did to help homeowners during the pandemic was extraordinarily effective, and we can see how few people lost their home, even as they went through periods of unemployment, loss of income, health issues, etc.”

Click here to view the Annual Report to Congress Regarding the Financial Status of the Federal Housing Administration Mutual Mortgage Insurance Fund for Fiscal Year 2023 in its entirety.