Association calls for adjustments to lower premiums for qualified borrowers
The Mortgage Bankers Association (MBA) has expressed concern that current mortgage insurance premiums (MIP) may be higher than necessary, limiting affordability for qualified borrowers.
The MMI Fund, which supports FHA’s single-family mortgage insurance programs, recorded a capital ratio of 11.47% as of September 30, 2024, up from 10.51% in 2023. This figure is more than five times the statutory minimum reserve ratio of 2%.
The forward mortgage portfolio had a capital ratio of 10.88%, while the Home Equity Conversion Mortgage (HECM) portfolio showed significant improvement, with a stand-alone capital ratio of 24.50%, a 7.78 percentage-point increase from FY 2023.
FHA’s insured portfolio includes approximately 7.81 million single-family forward mortgages and 287,000 HECMs, reflecting its substantial role in the housing market. About 82.64% of FHA-insured purchase loans went to first-time homebuyers, and 31.66% of FHA loans were made to borrowers of color, a slight increase over 2023.
The serious delinquency rate for FHA loans dropped to 4.15%, consistent with pre-pandemic levels and significantly down from its November 2020 peak of 11.90%, according to the report.
MBA calls for MIP reductions
MBA president and CEO Bob Broeksmit urged policymakers to reconsider current mortgage insurance premiums, especially in a high-rate environment that has strained affordability for first-time and low- to moderate-income buyers.
“With mortgage rates well above 6%, MBA and its members remain very concerned about the constrained affordability conditions for qualified first-time homebuyers and low- and moderate-income households,” Broeksmit said in a statement.
“At 11.47%, the Mutual Mortgage Insurance Fund is more than five times the statutory minimum reserve ratio. While it is sensible to have a healthy cushion above the 2% minimum reserve, qualified borrowers should not be charged higher mortgage insurance premiums (MIP) than necessary.”
Broeksmit said that eliminating FHA’s life-of-loan premium requirement and implementing further MIP cuts would provide immediate financial relief for borrowers, particularly first-time homebuyers and low- to moderate-income households.
“Quality underwriting and effective risk management and loss mitigation efforts by HUD, FHA lenders, and mortgage servicers continue to support a healthy FHA program that has a high capital reserve ratio and low delinquency levels,” he added.
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Seth Appleton, president of US Mortgage Insurers (USMI), echoed the importance of FHA’s role in the housing finance system but highlighted the need for a coordinated approach to housing policy that leverages private capital to mitigate taxpayer risk.
“FHA plays an important countercyclical role in America’s housing finance system, and it must remain strong and well-capitalized in order to perform this critical function,” he said. “While taxpayers stand behind 100% of the credit risk for FHA-insured mortgages, private capital stands in a first-loss position for low down payment loans backed by private MI.”
Appleton called for “a consistent, transparent, and coordinated approach to housing policy” that would shift more credit risk to private mortgage insurers, reducing the burden on taxpayers.
“This approach would enable FHA to focus on its mission of supporting borrowers who do not have access to traditional financing and ensure that it can play its countercyclical role under all economic conditions,” Appleton added.
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