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EQUIFAX’S “WATERSHED MOMENT” JANUARY 2018
FHA Mutual Mortgage Insurance (MMI) Fund
FHA guarantees for forward and reverse mortgages are administered under the Mutual Mortgage Insurance (MMI) Fund. At the end of 2017, the MMI Fund had $1,227 billion
in total mortgages outstanding and a capital ratio of 2.09%, remaining above the 2% statutory minimum for the third straight year but declining from the 2016 level of 2.35%. The HECM portfolio continues to have a negative impact on the MMI Fund, offsetting the positive capital position of the forward mortgage portfolio. While the 2017 capital ratio for forward mortgages was 3.33%, the HECM portfolio had a capital ratio of –19.84%. (Ef cient, Effective, Accountable: An American Budget Analytical Perspectives, Of ce of Management and Budget, Fiscal Year 2019)
OMB’s budget projects FHA will insure $230 billion in single-family mortgages in FY2019—down from $238 billion in FY2018—and generate a net pro t of $7.36 billion for the year, bringing the agency’s mortgage insurance reserves to $33.26 billion.
The budget proposes to charge lenders a fee of $25 per loan over the next four years to cover the cost of modernizing FHA’s aging IT systems. Through 2022, the IT fee would an estimated $20 million annually. During 2017, FHA’s loan origination system experienced 73 outages, OMB noted. Some of the agency’s programs date back more than 40 years.
“While no one questions that FHA’s technology needs to be modernized, it is disappointing that the administration thinks it is necessary to charge lenders this fee which will, in some form, be passed on to home buyers,” said Brian Chappelle, a partner at Potomac Partners.
OMB’s budget also proposes a permanent end to the cap of 275,000 loan guarantees to provide further stability for the reverse mortgages program. “This proposal re ects the signi cant improvements that have been made to the program to reduce risk to the MMI Fund and to ensure responsible lending to seniors,” wrote OMB. Overall, administration’s preferred plan would see a 1% increase in discretionary HUD funding for a total of $41.1 billion for HUD’s FY2019 budget. In addition, HUD would have the authority to issue $400 billion in loan guarantees, with $12 billion earmarked for HECMs. “This places the MMI fund at signi cant risk, and hampers FHA’s ability to effectively partner with the industry,” wrote OMB. (American Banker, Brian Collins, 02/13/18; ReverseMortgageDaily.com, Alex Spanko, 02/12/18)
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