Not only is business booming over at the FHA, but HUD secretary Shaun Donovan told Congress this week that the government insurance fund could earn $10 billion on new loan guarantees in fiscal 2011, which ends September 30.
The HUD secretary had other good news as well: Federal Housing Administration loans are performing better than expected and the insurance fund's capital reserves are stabilizing.
FHA raised its annual premium by 25 basis points last October and another 25 bps increase goes into effect this Friday (April 8).
This 25 bp increase is "expected to increase our receipts next year by about $2 billion," Donovan testified.
Congress requires FHA to maintain a minimum 2% capital ratio. However due to high defaults that ratio has slipped to 0.5%, mostly on loans guaranteed during the 2006-2008 period.
The performance of FHA originations since 2008, and the ensuing premium increases, should get the mortgage insurance fund back to the 2% capital level "by 2014 or sooner," the HUD secretary said.
