A fund that insures mortgages made by the Federal Housing Administration (FHA) on single-family homes and Home Equity Conversion Mortgages (HECM). The Congressional Budget Office blog stated in October that “reviews of the financial status of that fund in recent years have raised some concerns that the fund could soon be exhausted and that the mortgage guarantee program would then need to be “bailed out” by the Congress.”
The interesting aspect of this is that no congressional action is needed for the fund to be replenished; it occurs automatically under current law. The Department of Housing and Urban Development has recently made its annual report to Congress showing progress on the MMI Fund. According to the independent actuarial assessment, the Fund has gained $15 billion in value and now stands at an economic net worth of negative $1.3 billion. As shocking as that may sound, it’s actually a 92% improvement from the capital reserve ratio reported last year, and the Fund is expected to be back at or above the mandated minimum of 2% by 2015, which is two years ahead of previous estimates.
Although FHA Commissioner Carol Galante extolls the successes of the FHA, she implores Congress to pass legislation giving the FHA more effective tools to monitor and protect against risk as well as to take action to enforce all classes of lenders. HUD Secretary Shaun Donovan said the report showed “aggressive steps” have been taken to strengthen the FHA and put it on a sustainable path to fulfill its dual mission of supporting access to homeownership and stabilizing the housing market, according to HSH blog.
HUD’s report to Congress makes it clear that many steps have been taken on the road to financial recovery for the Fund, but there is still a ways to go before the proper security is once again attained. What are your thoughts on the status and viability of the MMI Fund? Leave us a comment below.