FHA Fund Unexpectedly Rebounds Past 2% Target

WASHINGTON — The Federal Housing Administration reported better than expected financial results on Monday, with the ratio of reserves to guaranteed loans soaring past its minimum threshold to reach 2.07%.

The rebound was due in part to a premium reduction earlier this year, which spurred higher loan volumes, according to the fiscal 2015 actuarial report.

This marks the first time the FHA's fund has been above its 2% minimum capital requirements since the financial crisis in 2008.

"FHA is on solid financial footing and positioned to continue playing its vital role in assisting future generations of homeowners," said Housing and Urban Development Secretary Julián Castro. "We've taken a number of steps to strengthen the fund and increase credit access to responsible borrowers."

Analysts had expected the FHA's fund to improve its position over last year, but not this much. Last year's report showed the fund had an economic value of $4.8 billion, equal to just 0.4% capital ratio relative to loans guaranteed by the agency. The actuaries projected that the fund would reach a 1.3% capital ratio by Sept. 30 of this year – and would not reach 2% until Sept. 30, 2016.

The report released Monday said that the insurance fund was worth $23.8 billion as of Sept. 30 of this year. The news is likely to put immediate pressure on HUD to cut premiums again for FHA loans, which remain high by historic levels. Castro said last month that the department would move cautiously before cutting premiums.

"Today's report demonstrates that we struck the right balance in responsibly growing the fund, reducing premiums, and doing what FHA was born to do – allowing hardworking Americans to become homeowners and spurring growth in the housing market as well as the broader economy," Castro said on Monday.

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