FHA Gains Increased Stability

The National Association of REALTORS® recently issued this press release concerning FHA, and I thought it was a compelling article to include in my blogspot:

Washington, November 16, 2010

The latest independent audit of the Federal Housing Administration shows the agency’s financial condition has improved from last year, when it announced its capital reserve fund had fallen below the 2 percent level mandated by Congress. The annual audit shows that the capital ratio for the single-family portfolio rose from 0.42 percent to 0.79 percent over the past year.



FHA Makes changes to become more stable.

 The audit, which calculates the financial condition of the agency’s insurance fund, also showed the mortgage insurance fund grew more than $1 billion in 2010 and reserves are expected to remain above $9.9 billion even if home prices were to fall further. The audit indicates that FHA will most likely not require a bailout now or in the future.

“As the leading advocate for home ownership, the National Association of Realtors® strongly supports FHA’s mortgage insurance programs,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “FHA announced major changes earlier this year and took critical steps to strengthen and ensure its long-term financial soundness, and those efforts have paid off.”



FHA Total reserves have grown to $33 Billion.

 FHA’s audit reflected a change in home values and was not tied to excessive increases in defaults or unsound underwriting practices. In fact, the credit quality of FHA borrowers has increased significantly in the last several years; the average credit score for FHA customers has grown to 693, and less than 8 percent of the agency’s purchase borrowers this year had FICO scores below 620. The capital reserves are not FHA’s only reserve fund; FHA also has a cash reserve account separate from the capital reserve – and actual total reserves have grown to $33 billion.

“The future health of FHA’s reserve funds depends heavily on the direction of home values in the coming years. Home values have shown patterns of stabilization over the past 18 months, and in a recent independent survey, most economists expect modest home price gains over the next 3 years, so FHA’s reserves should steadily improve,” said Phipps.

FHA has played a key role in providing mortgage liquidity to qualified home buyers in recent years and has greatly increased its market share; according to the agency, FHA guaranteed nearly 40 percent of home purchases in the past year.

NAR is working closely with FHA to reassess and amend their lending policies so even more qualified home buyers can become home owners.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

For information on Real Estate in Battle Creek or Calhoun County, Michigan, give me a call at: 269-441-8182 or contact me through my website at: http://www.michaeldelaware.com/.