FHA Report: Losses on Older Loans Still Dragging Recapitalization of Fund

The old mortgages are still stinking up the joint but the new ones are smelling sweet according to the annual report released today from the Federal Housing Administration (FHA).  The report shows that FHA continues to sustain losses from loans insured prior to 2009 that represent 70 percent of the expected losses from its single family portfolio in its Mutual Mortgage Insurance (MMI) fund.  While FHA’s capital reserve ratio remains below the congressionally mandated threshold, it feels that the ratios should approach two percent in 2014 and rise above the requirement in 2015 under conservative assumptions of future growth of home prices AND without any new policy actions.  Since last year, the fund has seen the capital reserve ratio stabilize and a significant decrease in insurance claims.

“It’s clear that FHA is in a stronger position today than we were just one year ago,” said FHA Commissioner David H. Stevens.  “While we are not yet completely out of the woods, based on the evidence we’re seeing, FHA is weathering the economic storm while helping to create a firm foundation for our nation’s recovery.”

For the full FHA 2010 Report to Congress