The Obama White House, in its new budget, predicts that the FHA Mutual Mortgage Insurance fund will return to health by 2015 -- but warns that the agency's book of business is vulnerable to what it calls “Black Swans.”
Budget language released Monday morning describes Black Swans as “outlier events that are difficult to predict and have deep effect,” adding that “These amplify otherwise normal estimation errors, contributing to large reestimations.”
At last check, FHA's MI fund had just $2.5 billion of capital on a $1 trillion portfolio, giving it a slim capital ratio of 0.24%.
In its 2013 budget the White House says the MIF ratio “will again exceed 2 percent by 2015” and adds that a low capital ratio does not threaten FHA's operations.
A few weeks ago rumors were circulating that the White House might predict a negative position for the MIF – based on more pessimistic estimations on where housing values might be headed.
FHA said it plans to “selectively” increase annual premiums on “market rate housing loans.”
FHA insurance helps fund almost one in four purchase money loans, compared to a market share peak of 30% in 2009.
