FHA Capital Ratio Rises

The Federal Housing Administration's capital ratio rose to 5.21% in fiscal year 2003 from 4.52% in fiscal 2002, but capital reserves rose by only $100 million to $22.7 billion, according to the annual actuarial report prepared by Deloitte & Touche."Two large offsetting impacts" contributed to the increase in the capital ratio, the auditors said. The quality of FHA single-family loans endorsed in fiscal 2003 increased the economic value of the FHA mortgage insurance fund by $2.8 billion. "Countering this effect is the extraordinarily high prepayment activity that has adversely impacted the FHA's economic value during FY 2003, as well as the claim activity that has exceeded the levels predicted in our 2002 study," the Deloitte & Touche report says. FHA loan endorsements totaled $147.4 billion in fiscal 2003, but runoff totaled $193.2 billion. The total FHA portfolio fell to $382.2 billion in fiscal 2003 from $435.4 billion the previous year. Meanwhile, claims from default loans jumped from $3.9 billion in fiscal 2002 to $7.3 billion in fiscal 2003.