U.S. Department of Housing and Urban Development
November 15, 2017
Annual Report to Congress Regarding the Financial Status of the Mutual Mortgage
Insurance Fund Fiscal Year 2017
U.S. Department of Housing and Urban Development
Financial Status of the FHA Mutual Mortgage Insurance Fund FY 2017 3
Table of Contents Secretarys Foreword .................................................................................................................................... 1
Annual Report Overview ............................................................................................................................... 5
Introduction .............................................................................................................................................. 5
Key Actuarial Review Highlights ................................................................................................................ 5
Enhancements to the Actuarial Review Process ....................................................................................... 7
FHA Forward Mortgage Highlights ............................................................................................................ 9
Historical Program Overview ................................................................................................................ 9
Who FHA Serves .................................................................................................................................. 11
New Endorsement Risk Monitoring .................................................................................................... 11
Counterparty Risk Monitoring ............................................................................................................ 11
Portfolio Credit Indicators ................................................................................................................... 12
HECM Highlights - For Mortgages in the MMIF ...................................................................................... 13
FY 2017 Changes to Stabilize the Fiscal Condition of New HECM Endorsements .............................. 13
FHA HECM Mortgage Highlights ......................................................................................................... 13
Cash Flow NPV: Meaning and Risks ........................................................................................................ 14
A Note About FHA Loan-to-Value Ratio Reporting ................................................................................. 14
Other FHA Programs and Exposures ....................................................................................................... 15
Chapter I: FHA Single Family Mortgage and Borrower Characteristics ...................................................... 16
FHA Forward Mortgage Program: New Endorsement Trends and Composition ................................... 16
Forward Mortgage Program: Portfolio Overview and Credit Trends ..................................................... 31
Home Equity Conversion Mortgages (HECM) Program Overview .......................................................... 39
Home Equity Conversion Mortgages (HECM): Endorsement Characteristics ........................................ 45
Chapter II: Condition of the Mutual Mortgage Insurance Fund ................................................................. 55
Summary ................................................................................................................................................. 55
Total Capital Resources Increased in FY 2017 ..................................................................................... 55
MMIF Capital Ratio Above 2.0 Percent but Decreased in FY 2017 ..................................................... 56
Capital Adequacy is Tested ................................................................................................................. 56
Cash Flows From Insurance Operations Improved ............................................................................. 56
New Independent Actuary for FY 2017 Confirms Baseline Projections Reasonable .......................... 57
Premium Decrease Impact Estimated: Would Have Moved MMIF Capital Ratio Below 2.0 Percent 57
MMIF Capital Ratio ................................................................................................................................. 58
Recovery in the Capital Account ............................................................................................................. 59
U.S. Department of Housing and Urban Development
Financial Status of the FHA Mutual Mortgage Insurance Fund FY 2017 4
Stand-Alone Capital Ratios for Forwards and HECM .............................................................................. 60
Cash Flow from Insurance Operations .................................................................................................... 66
Capital Ratio Sensitivity to Assumptions ................................................................................................ 69
Comparison to Independent Actuarys Results ...................................................................................... 70
Capital Adequacy .................................................................................................................................... 71
Capital Adequacy Testing: Distribution of Cash Flow NPV ................................................................. 71
Capital Adequacy Testing: MMIF Capital Ratio Outcomes ................................................................. 75
Chapter III: Federal Housing Administration Objectives ............................................................................. 78
Play a Significant Role in Disaster Recovery ........................................................................................... 78
Make Necessary Changes to the Home Equity Conversion Program (HECM) ........................................ 79
Clarity and Consistency for Mortgagees ................................................................................................. 79
Implementation of the Loan Review System (LRS) ............................................................................. 79
Continue Updates to the Single Family Housing Policy Handbook 4000.1 (SF Handbook) ................ 80
FHA Technology Modernization.............................................................................................................. 80
Develop FHA's Condominium Project Approval Final Rule ..................................................................... 81
Appendix A: Data Tables for Annual Report Overview ............................................................................... 82
Appendix B: Data Tables for Chapter I ........................................................................................................ 84
Appendix C: Data Tables for Chapter II ..................................................................................................... 109
Appendix D: FHA Single Family Housing Mortgagee Letters Published Fiscal Year 2017 ......................... 113
Appendix E: Fiscal Year 2017 Independent Actuarial Review of the Mutual Mortgage Insurance Fund:
Cash Flow Net Present Value from Forward Mortgage Insurance-in-Force ............................................. 115
Appendix F: Fiscal Year 2017 Independent Actuarial Review of the Mutual Mortgage Insurance Fund:
Cash Flow Net Present Value from Home Equity Conversion Mortgage Insurance-in-Force .................. 151
U.S. Department of Housing and Urban Development
Financial Status of the FHA Mutual Mortgage Insurance Fund FY 2017 5
Annual Report Overview
Introduction This years Federal Housing Administration (FHA) Annual Report to Congress: The Financial Status of the FHA Mutual Mortgage Insurance Fund (FY 2017 Annual Report or Annual Report) reflects a transition by FHA in process, methodologies, and content toward providing more transparency, consistency, and accountability. These changes reflect FHAs commitment to enhanced disclosure on the financial condition and sustainability of its Single Family Housing (Single Family) mortgage insurance programs. The FY 2017 Annual Report also provides added insight into the economic drivers impacting the performance of the Mutual Mortgage Insurance Fund (MMIF, MMI Fund, or Fund).
Key Actuarial Review Highlights
Exhibit O-1: Mutual Mortgage Insurance Fund (MMIF) Capital Ratio Components
Description 2016 2017
Balances ($ millions) as of September 30
Total Capital Resources $35,346 $39,737 Plus: Cash Flow NPV ($7,795) ($14,112)
Equals: Economic Net Worth $27,551 $25,625 Insurance-In-Force $1,170,421 $1,226,843
Balances as a Percent of Insurance-In-Force
Total Capital Resources 3.02% 3.24% Plus: Cash Flow NPV -0.67% 1.15% Equals: Economic Net Worth - Capital Ratio 2.35% 2.09%
The FY 2017 MMIF Capital Ratio is 2.09 percent, exceeding the statutorily-required level of
2.00 percent.
This is the third-straight year it is above 2.00 percent.
The MMIF declined from its 2.35 percent Ca
