FHA’s Future

January 6, 2020

Significant changes in the residential government housing industry are underway.

In 2019 – in its 85th year of service – the Federal Housing Administration (FHA) insured over 990,000 forward mortgages and over 31,000 Home Equity Conversion Mortgages (HECM).*

Although the annual results are directionally positive, FHA must strengthen its portfolio if it is to capably fulfill its role as a source of mortgage credit, particularly during periods of market distress, and ensure taxpayers are protected from unnecessary risks.

In the Housing Finance Reform Plan released in September 2019, the U.S. Department of Housing and Urban Development (HUD) proposed a number of solutions that would reduce risks to the MMI Fund, protect taxpayers from future bailouts, and ensure the FHA maintains its focus on providing access to mortgage financing to low- and moderate-income families that cannot be fulfilled through traditional underwriting.

This is a crucial time for FHA – and it has received crucial funding to continue to modernize its infrastructure. Specifically, the agency has been entrusted by Congress with $20 million of initial funding for information technology, and is aggressively building the state-of-the-art replacement for its antiquated and aging infrastructure.

This appears to be a much-needed move for the FHA, to keep up with growing demand.

According to Freddie Mac Chief Economist Sam Khater, “A more accommodative monetary policy stance and robust labor market helped the U.S. housing market regain its footing in 2019. Improved sentiment, lower financial market volatility and trade headwinds are setting up a favorable economic environment for continued real estate market growth in 2020.”

The FHA has been granted the funding needed to join the digital age of mortgage lending. That’s great news! However, technological overhauls cannot happen overnight.

“The work we have done this past fiscal year, and the work we intend to undertake going forward, will make certain FHA can continue to continue fulfilling a role to serve qualified first-time, low and moderate-income and minority homebuyers, and seniors wishing to age in place,” says Benjamin S. Carson, Sr., M.D., U.S. Department of Housing and Urban Development Secretary.

We hope so. The industry is watching, and many families rely on FHA programs in their pursuit of the American dream of home ownership.

* FY 2019 Annual Report to Congress Regarding the Financial Status of the Mutual Mortgage Insurance Fund