FHA Annual Report Touts Agency’s Covid-19 Loss Mitigation Activities, Lending to Disadvantaged Communities

The Federal Housing Administration (FHA) earlier today released its 2022 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) 2022. Also outlined are FHA’s efforts to help homeowners impacted by Covid-19 and the improving status of FHA’s Mutual Mortgage Insurance Fund (MMIF).

In FY 2022, FHA endorsed 982,202 forward mortgages, slightly down from FY 2021 due to increased interest rates in the second half of FY 2022. Seventy percent (678,675) of the forward mortgages endorsed by FHA were home purchase loans. Eighty-four percent of home purchase mortgages went to first-time home buyers, 37 percentage points higher than other market participants. The share of FHA mortgages for minority borrowers was 29 percent. 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 two times as many Hispanic borrowers by share.

Nearly 1.8 million households with FHA-insured mortgages took advantage of FHA’s Covid-19 forbearance offering, which permitted borrowers to postpone making their mortgage payments, including more than 400,000 borrowers who requested it for the first time in FY 2022. FHA estimates more than one million of these homeowners subsequently have entered into loss mitigation plans to help them remain in their homes or are in the process of doing so, while 655,000 have already cured their delinquency or paid off their mortgages. FHA reports the default rate for borrowers who have entered a Covid-19 loss mitigation option is currently 10 percent, half the historical default rate for FHA borrowers who enter loss mitigation.

The total economic value of the MMIF, which funds FHA’s forward mortgage and Home Equity Conversion Mortgage (HECM) programs, increased $41.2 billion in FY 2022 to $147.7 billion. The MMIF’s capital ratio increased three percentage points to 11.1 percent. This is the seventh consecutive year the MMIF’s capital ratio exceeded the two percent minimum after dipping below it during the Great Recession.

The MMIF’s improving financial health has prompted some housing advocates to call on FHA to reduce mortgage insurance premiums for FHA home buyers. During a call for stakeholders to discuss the report, FHA Commissioner Julia Gordon said the agency is examining possible adjustments to the premiums but would not make a decision on it until sometime next year.

According to data from NCSHA’s State HFA Factbook, 61 percent of HFA single-family program loans in 2021 were insured by FHA.