The FHA Single Family Insurance Program: Performing a Needed Role in the Housing Finance Market Presented by: Edward Szymanoski US Department of Housing and Urban Development Office of Policy Development and Research November 8, 2012
• This paper provides useful facts, descriptions of policies undertaken, and information about FHA and its history that can inform debates about FHA’s future role. • The first section provides an historical overview of FHA's role in stabilizing housing markets, setting market standards, providing information, and addressing market failures such as credit rationing. • The second section shows how this role provides improved opportunities for low- wealth (often newly formed) households to access affordable, sustainable homeownership. • The third section features some significant challenges that FHA has faced over the years and the steps it has taken to meet these challenges. • Its response to the current housing crisis is described in the fourth section: FHA maintained access to federally-guaranteed mortgage credit in the face of a severe curtailment of private capital in the market, and has assisted distressed homeowners to keep their homes. • The appendix reviews key questions and policies that will inform the future role of FHA, including questions related to the costs and benefits of FHA’s countercyclical role, pending regulatory and institutional reforms (QM,QRM, Basel III) that could affect underwriting standards in the conventional mortgage market.
Table 3-1. FHA's Recovery After 1990 Reforms Viewed Over Ten Years FHA MMI Fund Economic Values and Capital Ratios by Fiscal Year of Actuarial Review FY 1989 – 2004 Fiscal Year of Capital Ratio A ctuarial Insurance-In- Economic NA HA Target (Econ Value as Review Force (IIF) Value ($M) Capital Ratio Percent of IIF) $263,963 $3,133 1.19% 1989 - 1990 $304,216 ($2,674) -0.88% - 1991 $327,811 ($669) -0.20% - 1992 $325,912 $1,405 0.43% 1.25% 1993 $316,527 $4,554 1.44% 1.25% 1994 $335,073 $6,682 1.99% 1.25% 1995 $345,278 $7,086 2.05% 1.25% 1996 $370,484 $9,397 2.54% 1.25% 1997 $400,850 $11,258 2.81% 1.25% 1998 $419,575 $11,360 2.71% 1.25% 1999 $454,184 $16,637 3.66% 1.25% 2000 $482,732 $16,962 3.51% 2.00% Source: HUD
Exhibit IV-4. FHA Is Known to Have Ramped Up its Support for Home Purchases, Less Well Known is Its Support for Refinances During Crisis FHA As Share Of Quarterly Mortgage Originations By Type (Percent) 45 40 35 30 25 20 15 10 5 0 Purchase Refinance Combined Sources: MBA and HUD.
FHA Single Family Insurance Program - Changes in Business Composition Just Before and After the Crisis Data as of July 2012 FY 2006 FY 2009 Total Insured Percent of FY Total Insured Case Percent of FY Type of FHA Mortgage Downpayment Gift Source Case Count Endorsements Count Endorsements No Gift 113,220 26.6% 548,034 29.9% First Time Buyer Nonprofit/Government 85,435 20.1% 45,773 2.5% Relative/Employer 50,229 11.8% 187,872 10.3% Subtotal First Time Buyer 248,884 58.5% 781,679 42.7% No Gift 39,803 9.4% 174,202 9.5% Other Home Purchase Nonprofit/Government 17,895 4.2% 9,916 0.5% Relative/Employer 7,416 1.7% 29,754 1.6% Subtotal Other Purchase 65,114 15.3% 213,872 11.7% Conventional to FHA Refinance 60,114 14.1% 468,644 25.6% FHA To FHA Refinance (Non-Streamline) 14,722 4.0% 38,365 2.1% Streamline Refinance 36,374 10.4% 329,437 18.0% 350,372 100.0% 1,831,997 100.0% Total Endorsements Prepared by HUD, Office of Economic Affairs 8/20/12
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