FHA originators are expecting FHA mortgage insurance premiums to rise. (Would anyone expect them to decline, given the rising delinquencies and government officials continuing to claim that they will not need taxpayer money to support the program?)  The insurance fund’s capital ratio is at an all-time low, with reserves depleted to the point where they’ve fallen below the 2 percent level required by Congress. That being said, the FHA’s annual independent “actuarial study” shows that the FHA has sustained “significant” losses from loans made prior to 2009, and the capital reserve ratio has fallen below the congressionally mandated threshold. However, the report concludes that, under most economic scenarios, the reserves should stay above zero.  

This should come as no surprise, as our economy may be gaining traction in some sectors, however as long as the unemployment hovers right around 10% for the nation…….we may have another year of increased or sustained home losses and foreclosures.  Thus resulting in higher MI coverages for all of the FHA sponsored loans. 

Kevin J. Lawson