Thursday, September 20 , 2018, 10:40 am | Fair 70º

 
 
 
 

Alec Bruice: Door Open May be Open to More Affordable Homeownership

The Federal Housing Administration’s just released actuarial report shows the Mutual Mortgage Insurance Fund (MMIF) is on a steady financial trajectory, a finding the National Association of Realtors® believes is an opportunity to make FHA’s low-down-payment mortgage option available to an even broader swath of borrowers.

“FHA’s actuarial report shows that the fund has indisputably found its footing,” said NAR President Bill Brown. “That’s good news for taxpayers, and a reflection of FHA’s sound stewardship.

"It’s clear from this report that FHA can continue taking responsible steps to manage their risk even as they take action to make homeownership more affordable for lower- and middle-income buyers,” Brown said.

FHA’s MMIF is responsible for paying lenders if a mortgagor defaults. In a sign of continuing health, the report shows that the fund’s “seriously delinquent” rate is at a 10-year low, while the overall economic value of the fund has increased by $3.8 billion.

Last year, the MMIF also achieved a 2 percent capital reserve ratio for the first time since the Great Recession.

This marked an important benchmark showing the fund had strongly rebounded, a finding reinforced by the 2.3 percent capital reserve ratio FHA reported today. FHA also reported a 3.2 percent reserve ratio for the “forward” program, which encompasses FHA’s non-Home Equity Conversion Mortgage portfolio.

NAR believes the report would have appeared even stronger if not for weaknesses in the HECM program.

In light of the MMIF’s increasingly good health, NAR is encouraging FHA to reduce mortgage insurance premiums to better reflect the risk in the marketplace and fulfill its mission of serving low- and moderate-income borrowers.

According to NAR estimates, the 50-basis-point premium cut announced in January 2015 provided an annual savings of $900 for nearly 2 million FHA homeowners. A recent federal reserve study also found the January 2015 reduction in mortgage insurance premiums had a quick and significant effect on FHA mortgage volume.

NAR also supports eliminating “life of loan” mortgage insurance, which borrowers must continue to pay until the loan is extinguished or refinanced. Conventional mortgage products, by contrast, traditionally require mortgage insurance only until a sufficient amount of equity is achieved on the property.

“FHA mortgages are an important option for buyers, but high premiums and lifetime insurance requirements can take that option right off the table,” Brown said. “By lowering premiums and eliminating life of loan mortgage insurance, FHA can expand on their work to serve a broad population of homebuyers.

"We look forward to working with them in the months ahead to bring these changes to light.”

Taken from the National Association of Realtors®

Alec Bruice is a licensed real estate broker with Santa Barbara Brokers and the 2016 president of the Santa Barbara Association of Realtors. Contact him at [email protected] or 805.637.5774. The opinions expressed are his own.

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