HUD: FHA Publishes Annual Report to Congress on the Single Family Mutual Mortgage Insurance Fund

Report shows a moderate gain in the MMI Fund’s capital ratio and successful continuation of FHA’s core mission focus in fiscal year 2020 

The Federal Housing Administration (FHA) today released its fiscal year (FY) 2020 annual report covering the financial status of the Mutual Mortgage Insurance (MMI) Fund and its Single Family insurance programs.  In addition to its emphasis on helping homeowners financially impacted by the COVID-19 global pandemic, in FY 2020 FHA also served a record number of its core mission demographic of first-time and minority homebuyers.

As the report illustrates, the MMI Fund achieved gains in its overall capital ratio, ending the fiscal year at 6.10 percent – an increase of 1.26 percentage points over FY 2019 and well above the Congressionally mandated 2.0 percent capital ratio. As forecasted, this level of capital will help FHA withstand the immediate financial impacts to the Fund of the COVID-19 pandemic without requiring additional assistance from taxpayers. The report also provides the data and rationale to support a prudent capital management strategy moving forward so the Fund can continue to withstand any future or protracted economic stress events.

“In a year like no other in recent memory, the Trump Administration’s extraordinary response to COVID-19 paved the way for FHA to play a leading role in helping struggling families and the nation’s housing market in FY 2020,” said HUD Secretary Ben Carson. “At the same time, FHA successfully served more of the nation’s first-time homebuyers and maintained its leadership role as the nation’s largest facilitator of affordable mortgage financing for minority borrowers.”

“While we focused our efforts on helping FHA homeowners impacted by the global pandemic keep their homes, we balanced this with sound risk management to protect taxpayers,” said Assistant Secretary for Housing and Federal Housing Commissioner Dana Wade. “We also continue to demonstrate that during these times, FHA is open for business. As proof of this, we’ve exceeded expectations by bringing to market FHA Catalyst, a state-of-the-art technology platform that will keep credit flowing to FHA’s core borrowers while providing  us with the data and analytics we need to identify and manage risk.”

The MMI Fund supports FHA’s Single Family mortgage insurance programs, including all forward mortgage purchase and refinance transactions, as well as mortgages insured since 2009 under the Home Equity Conversion Mortgage (HECM) reverse mortgage program.

KEY HIGHLIGHTS FROM FHA’S FY 2020 MMI FUND ANNUAL REPORT

  • As of September 30, 2020, FHA had active insurance on more than 8.3 million single family forward and reverse mortgages, with a total unpaid principal balance of more than 1.29 trillion. FHA market share decreased from 11.56 percent in FY 2019 to 9.61 percent in FY 2020.
  • The share of first-time homebuyers using FHA insurance reached a new high of 83.1 percent of total FHA forward mortgage purchase endorsements in FY 2020.  Similarly, the share of mortgages insured by FHA to minority borrowers reached almost 33 percent of all FHA forward mortgage insurance endorsements in FY 2020.
  • The combined capital ratio for FY 2020 was 6.10 percent, an increase of 1.26 percentage points over FY 2019’s 4.84 percent capital ratio. The combined 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 6.31 percent as of September 30, 2020.
  • While improved compared to last year, the Home Equity Conversion Mortgage (HECM) reverse mortgage portfolio had a negative 0.78 percent capital ratio as of September 30, 2020.
  • The forward mortgage portfolio continues to support the negative financial performance of the HECM portfolio. The HECM portfolio’s future financial performance is highly sensitive to changes in House Price Appreciation and other economic factors.

INDEPENDENT ACTUARY

Pinnacle Actuarial Resources, Inc. (Pinnacle) served as the independent actuary for FY 2020. By serving as a critical check on the results, an independent actuarial review remains an integral part of the Annual Report process. Pinnacle’s independent actuarial review reports for forward mortgages and HECMs confirms that the estimates used in the FY 2020 Annual Report to calculate the capital ratio are reasonable. The reports are available on HUD.gov.

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