Since December, FHA’s performance has only gotten better in terms of loan loss severity rate, loan delinquencies and home prices, according to mortgage consultant Brian Chappelle.
“If OMB did a re-estimate, FHA would be $5 billion to $10 billion better off,” Chappelle said. “There would be no issue.”
But OMB is “stuck” with the December estimate, he explained. Under the budget rules, a draw is technically necessary because OMB cannot update its December estimate, according to the founding partner of Potomac Partners.
However, “the FHA fund is in better shape than implied by the draw. And it is a positive harbinger for the actuarial review,” Chappelle said.
HUD is slated to release the annual FHA actuarial review in early November, which is used to determine FHA’s capital ratio. It is prepared by independent auditors who review the performance of FHA’s entire loan portfolio.