FHA’s Insurance Fund Close to Rebuilding Cushion, Moody’s Says

The Federal Housing Administration is close to replenishing its troubled insurance fund to minimum required levels, according to a report by Moody’s Analytics, which provides economic data the agency uses to determine its financial health.

The FHA’s reserves have been below mandated levels since 2009 and last year it had to take $1.7 billion in taxpayer funds to balance its books for the first time in its 80-year history. The government mortgage insurer is required to keep enough funds on hand to pay for all future costs of defaulted loans, plus a two percent cushion.

The fund “will have close to the 2 percent required minimum this fiscal year,” Mark Zandi, chief economist at Moody’s Analytics, wrote in an October report.

Zandi’s comments come about a month before the FHA is planning to release the results of its legally mandated annual actuarial report.

Premium increases that have helped the agency rebound could be reversed, Zandi wrote.

“The FHA’s financial situation is improving rapidly, and it should be able to significantly reduce its insurance premiums in the next year or two,” he said in the report.

Cameron French, a spokesman for the Department of Housing and Urban Development, declined to comment on Zandi’s projection that the FHA fund is close to attaining its minimum required balance.

“The fund is in a strong position and will not need a draw from the Treasury this year, and we expect the next actuarial report to reflect those improvements,” he said.

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