HUD: FHA Lending in Good Shape, No Premium Decrease
By Kerry Smith
In a quarterly report to Congress, HUD said it has no “near term” plans to change FHA mortgage insurance premiums, citing delinquencies and its “duty to manage risks.”
WASHINGTON – On Tuesday, Department of Housing and Urban Development (HUD) Secretary Marcia L. Fudge discussed the FHA insurance program and the health of the Mutual Mortgage Insurance Fund a year after the COVID-19 health and economic fallout.
Since HUD’s FHA loan program provides assistance to homebuyers with smaller downpayments, the program’s health has been a primary focus after the Great Recession. As part of that oversight, HUD provides a quarterly report to Congress on the FHA insurance program and detailed information on the composition, credit quality and financial position of the program. Fudge included updated information with the report.
“The health of FHA’s Mutual Mortgage Insurance Fund has remained resilient despite the financial challenges faced by homeowners with FHA-insured mortgages in 2020,” she said. “The fund stands at more than $80 billion and remains well above the 2% minimum capital reserve required.”
The Insurance Fund – a buffer from the impact of troubled FHA loans – fell below its 2% minimum for a while after the Great Recession, but it’s now higher thanks in part to rising home values.
However, Fudge noted that FHA’s portfolio has experienced “increased levels of seriously delinquent loans and a heightened level of loans in forbearance,” and HUD continues to “monitor mortgage performance trends within our portfolio, particularly related to those homeowners who are struggling financially because of the pandemic.”
Citing that “delinquency crisis,” Fudge said HUD currently has “no near-term plans to change FHA’s mortgage insurance premium pricing.” The wording suggests that the policy is temporary, and Fudge says HUD will “continue to rigorously evaluate our strategy and work transparently with Congress. Our number one priority is helping families keep their homes and remain safe as we work toward an equitable recovery.”
In reporting on insurance premium pricing, the Cowen Washington Research Group said it expected a cut in premiums as part of HUD’s efforts to close the racial homeownership gap, noting that since it didn’t happen, it’s possible “the fund may have more exposure than the actuarial report indicates.”
Still Fudge’s remarks make it clear that the policy isn’t permanent, and the Cowen Group thinks it’s still likely a cut in premiums will happen “once it is clear that the COVID-19 economic crisis is over. We believe that would be 2022 at the earliest.”
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