FHA Fund Expected to Improve, But Still Faces Struggles
By Brian Collins
A report due next week on the Federal Housing Administration’s financial health is expected to show that the agency’s reserve fund has significantly improved over the past year. The report, which is expected to be released at any time, is highly anticipated after the FHA made changes since the financial crisis in an effort to shore up its balance sheet. During an appearance this week, Biniam Gebre, the FHA’s acting commissioner, touted the agency’s improvements, saying the agency has made great strides in revamping its single-family program. FHA has restructured and raised its premiums, tightened underwriting practices, stepped up enforcement against bad actors and updated FHA’s loss mitigation practices to make sure families get “more help sooner,” Gebre said Thursday. Those changes and other factors are showing up the performance of the FHA program. “Over the past few years we have seen a 30% drop in serious delinquencies,” he said. He also cited a 60% drop in foreclosure starts and more than a 68% improvement in recovery rates on REO and nonperforming loans. FHA is “back on track,” Gebre declared during a speech at a housing symposium sponsored by the Ballard Spahr LLP law firm in Washington. Analysts and pundits expect this year’s report to show further improvement that will push the capital ratio to around 1%. But the fund is not likely to hit 2%, the statutory minimum capital ratio. During his remarks, Gebre did not comment on the pending actuarial report, but his upbeat assessment confirmed analyst expectations that the fund is improving but still faces challenges. “It will, we expect, show that FHA is better, but not yet well,” according to a Federal Financial Analytics report issued Thursday. The Washington analysts warned that the FHA single-family program faces headwinds going forward due to new competition from Fannie Mae and Freddie Mac.