Acting FHA commmissioner says FHA market share 'thankfully beginning to recede'






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Publication: Mortgage Banking
Date published: April 1, 2012

Acting Federal Housing Administration (FHA) Commissioner Carol Galante told the authence at the Mortgage Bankers Association (MBA) National Mortgage Servicing Conference on Feb. 22 that her agency knows "it is not ideal for FHA to have a large footprint in the market, but our role thankfully is beginning to recede a little." She predicted that during the current fiscal year (FY), FHA will do "less business than last year" in its single-family program, based on the first few months of the government's fiscal year.

In prepared remarks, Galante noted that FHA saw loan volume reach $236 billion in fiscal year 201 1, which represents more than 1.2 million loans insured. That volume was down from the more than $360 billion insured in fiscal year 2009, the highest dollar volume ever for the government insurance program.

Galante told the servicing conference authence that the government's projection for FY 2013 is that FHA will insure about $150 billion in home loans. "That represents less than half of our volume at the peak, and yet is still quite a bit of market share," she said.

The acting FHA commissioner also addressed recent news reports that have raised questions about the financial health of the FHA's Mutual Mortgage Insurance Fund (MMI Fund) and whether the fund might require an infusion from the U.S. Treasury.

President Obama released his fiscal year 2013 budget request on Feb. 13, which included economic assumptions and projected 3O-year losses for the MMI Fund through the current fiscal year. That prompted media speculation about the possible need for a cash infusion to FHA's Capital Reserve Account, Galante said.

However, Galante told the conference that the budget document does not factor in the impact from subsequent events such as the attorneys general settlement with five of the nation's largest servicers. FHA stands to gain "nearly $1 billion through the mortgage settlement agreements to compensate for projected losses to FHA," according to Galante.

"Combined with additional steps we are taking, it means that the likelihood that we would draw on the Treasury is greatly reduced," Galante said.

The acting FHA commissioner noted that while the FHA's Capital Reserve Account will have a positive balance in 2013, according to the budget projections, the FHA plans to take further steps to ensure that the fund does rebound. "In addition to the increases in the annual premium of 10 bps jbasis points] mandated by Congress and 25 bps for jumbo loans which are already included in the FY 2013 budget, we will soon be announcing more changes to the premium structure," she said.

Galante told the servicing crowd to expect FHA to continue to use its current enforcement authority to go after "those who fail to play by the rules." She said the government will be "pursuing further congressional action to strengthen FHA's lender-enforcement capabilities."

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