When the White House releases its fiscal year 2013 budget next week it's expected to show that the Federal Housing Administration's mortgage insurance fund is still in the black – but barely, according to mortgage insurance and former regulators who have been tracking the issue.
A few weeks ago there were fears that the MIF might tip into the red because of rising delinquencies and declining home values. This would have forced the Obama Administration to tap a Treasury line of credit to fund the capital shortfall.
But it's believed the so called “credit subsidy” (as it's called) will be negative, which means the FHA MIF will not need an immediate infusion of cash.
Back in November HUD released an audit of the MIF showing it had just $2.5 billion of capital on a $1 trillion portfolio, giving it a slim capital ratio of 0.24%. (At the time FHA had $31.2 billion in capital reserves for expected losses.)
Consultant Ed Pinto, a frequent FHA critic, maintains in a recent white paper that the fund has a capital shortfall of $35 billion to $53 billion.
Figures compiled by HUD confirm that delinquencies on FHA's book of business are worsening. At yearend 716,786 loans (9.73%) were deemed “seriously delinquent” (90-days or more pass due) compared to 636,778 (8.77%) at Sept. 30.
The fund loses roughly $80,000 on each delinquent loan, according to private sector analysts.
FHA officials contend that insurance policies written by the agency the past two years are high quality with FICO scores north of 700.
FHA's most problematic loans are those where the seller provided downpayment assistance, a practice that was discontinued three years ago.
