HUD: FHA Will Not Require A Treasury Draw

The Federal Housing Administration's (FHA) Mutual Mortgage Insurance (MMI) Fund fell below zero to -1.44%, representing a negative economic value of $16.3 billion. However, the U.S. Department of Housing and Urban Development (HUD) stresses the FHA will not have to draw funds from the U.S. Department of the Treasury in order to remain operational.

In conjunction with the release of an annual actuarial report on the FHA to Congress, HUD issued a statement saying the MMI Fund's problems did not mean the agency had insufficient cash to pay insurance claims or maintain its current operations. Instead, the department claims that the ‘actuary's estimate of the [MMI] Fund's economic value excludes $11 billion in expected capital accumulation through the end of fiscal year 2013.’

‘FHA has weathered the storm of the recent economic and housing crisis by taking the most aggressive and sweeping actions in its history to reform risk management, credit policy, lender enforcement, and consumer protections,’ says HUD Secretary Shaun Donovan. ‘During this critical period in our nation's economic history, FHA has provided access to homeownership for millions of American families while helping bring the housing market back from the brink of collapse to a point where the outlook is positive and recovery is underway.’

The FHA's financial health had been the subject of several speculative media reports that it would require its first-ever Treasury draw. Debra W. Still, chairwoman of the Mortgage Bankers Association, gave a glass-half-full response to the news of the report.

‘While everyone had hoped for a better report, the news that the Fund has gone negative is not wholly unexpected, as last year's report predicted there was a 50 percent likelihood this would occur,’ said Still in a press statement. ‘The characteristics and stresses on FHA's pre-2010 books of business continue to be the source of losses, while books from 2010 onward are performing well. The good news is that the steps that FHA has taken to better manage its risk in recent years have succeeded in vastly improving loan performance on more recent vintages.’


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