FHA Annual Report Highlights Agency’s Lending to Underserved Borrowers and Loss Mitigation Efforts

The Federal Housing Administration (FHA) earlier today released its 2023 Annual Report to Congress. The report finds FHA continued to play a critical role in supporting home financing for first-time home buyers and other underserved borrowers in fiscal year (FY) 2023. Other highlights include FHA’s efforts to help homeowners impacted by Covid and the status of FHA’s Mutual Mortgage Insurance Fund (MMIF).

In FY 2023, FHA endorsed 732,319 forward mortgages, a 25 percent decrease from FY 2022. The decline reflects increased mortgage interest rates, which reduced overall homeownership lending since the second half of 2022. Based on market data, FHA projects its annual production has declined less than other market participants.

Seventy-nine percent (581,725) of the forward mortgages FHA endorsed were home purchase loans. Eighty-two percent of home purchase mortgages went to first-time home buyers, compared to 48 percent in the market as a whole. Borrowers of color accounted for 30 percent of FHA borrowers in 2023. Compared to other market participants, FHA served three times as many Black borrowers by share of its total forward mortgage insurance endorsements than the rest of the market and 1.5 times as many Hispanic borrowers by share.

Nearly 40 percent of FHA borrowers in FY 2023 received down payment assistance. This includes 15 percent who received assistance through state HFAs or other government programs.

FHA’s seriously delinquent rate (loans 90 or more days past due) at the end of FY 2023 was 3.93 percent, down from a peak of 11.9 percent in November 2020 and nearly identical to its level directly before the Covid pandemic. The agency credits this improvement to its Covid foreclosure prevention activities. Nearly 2.4 million FHA borrowers took advantage of FHA’s Covid forbearance offering, which permitted borrowers to postpone making their mortgage payments. FHA estimates more than 1.1 million of these homeowners subsequently have entered loss mitigation plans to help them remain in their homes or are in the process of doing so, while 772,000 have already cured their delinquency or paid off their mortgages. FHA says it intends to apply lessons learned from this experience loss when developing new loss mitigation policies.

The total economic value of the MMIF, which funds FHA’s forward mortgage and Home Equity Conversion Mortgage (HECM) programs, increased 2.5 percent in FY 2023 to $145.3 billion. The MMIF’s capital ratio declined slightly to 10.5 percent but remains more than five times higher than its statutory minimum.

According to data from NCSHA’s State HFA Factbook, 56 percent of HFA single-family program loans in 2022 were insured by FHA.