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U.S. Department of Housing and Urban Development (HUD) Secretary Julian Castro is set to testify February 11 before the House Financial Services Committee. The Committee will propose questions about the financial status of the Federal Housing Administration (FHA), the recent announcement of the lowering of mortgage insurance premiums, and the condition of the Mutual Mortgage Insurance Fund (MMIF) among other topics.
The condition of the MMIF will be a hot topic since it is reported that the fund is currently not maintaining its mandated capital reserve ratio. According to HUD, the MMIF “is the largest fund covering activities of the Federal Housing Administration (FHA).” The fund must retain a capital reserve ratio of at least 2 percent.
The Annual Report to Congress Regarding the Financial Stability of the FHA Mutual Mortgage Insurance Fund Fiscal Year 2014 reports that the capital reserve ratio is at 0.41 percent. Given the below-mandated percentage, the Committee is expected to heavily question Castro on the subject.
However, it must be noted that this percentage is still an improvement from the previous year. According to the fiscal year 2013 annual report, the capital reserve ratio improved by 92 percent with a ratio of negative 0.11 percent. Thus, the 2014 capital reserve ratio is an improvement although there is still a long road ahead.
Another topic of much contention is the lowering of mortgage insurance premiums. In a January speech, President Obama made the announcement which elicited applause and protest at the same time. Obama’s speech further explained that there will be a reduction of 50 basis points for the annual premiums charged for single-family loans. The reduction is one of many moves to improve affordable housing.
The hearing will take place at 10:00 a.m. Eastern time at the House Visitors Center.