Brief The FHA’s Annual Report, Its Financial Health, and How It Should Cut Pricing
Laurie Goodman, Jim Parrott
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The Federal Housing Administration released its 2021 financial report to Congress on November 15, 2021. Each year, its determination of the level of the Mutual Mortgage Insurance (MMI) Fund affects a wide range of decisions about how to price and manage its business. This year’s report shows an MMI capital ratio of 8.03 percent, a significant jump from its 2020 level of 6.1 percent and well above the statutory minimum. The FHA’s improving health enables it to provide more benefit to its borrowers through measures that will ultimately reduce its net revenues and thus its capital reserves. This brief assesses how much room the FHA has to work with and how it could use that room most effectively. We find that the FHA’s financial health provides considerable flexibility, despite an unnerving level of stress in its portfolio and that the best course is to provide deep, targeted cuts to help borrowers who would most benefit from them.

Research Areas Housing finance Housing
Tags Federal housing programs and policies Housing markets Agency securitization
Policy Centers Housing Finance Policy Center