"By reducing our rates, this administration is taking a significant step to encourage the preservation and development of affordable and energy efficient housing in communities large and small," said HUD Secretary Julian Castro.
"By reducing our rates, this administration is taking a significant step to encourage the preservation and development of affordable and energy efficient housing in communities large and small," said HUD Secretary Julian Castro. Image: Bloomberg

The financial condition of the Federal Housing Administration’s mortgage insurance fund has improved “significantly” over the past year, Department of Housing and Urban Development Secretary Julian Castro predicted late Monday.

HUD has not received the fiscal year 2015 actuarial report from independent auditors yet, but he said he expects the 50-basis-point reduction in FHA's annual premium has boosted originations along with the insurance fund's capital reserves.

FHA endorsed more than $200 billion in loans during fiscal 2015, which ended Sept. 30, compared to $134 billion in fiscal 2014.

“We are hoping with the increased volume that the capital reserve ratio has gone up significantly,” Castro said at a housing event Monday evening at George Washington University.

But the HUD secretary indicated he is not considering another premium reduction at this time.

The 2014 actuarial report estimated that FHA’s insurance fund had a capital ratio of 0.4%, well below its 2% statutory minimum capital ratio. Last year, independent actuaries projected that FHA would reach a 1.4% capital ratio in fiscal 2015.

Though there does not appear to be a major push underway for another FHA premium reduction, the November actuarial report could spark more interest if it shows the FHA’s insurance fund is higher than 1.4%.

“As the fund continues to get stronger,” Castro said, it will allow HUD to consider another premium reduction again.

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