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Montgomery, Becker, Oppenheimer: Reverse Mortgage Capital Ratio Turns Positive, But No Time for Complacency, Reverse Mortgage Daily

Sunday, November 21, 2021

Written By Brian D. Montgomery, Keith Becker and Dror Oppenheimer

For the first time since 2015, the Capital Ratio for the reverse, or Home Equity Conversion Mortgage (HECM), book of the Federal Housing Administration (FHA) has moved into positive territory.
The HECM portfolio’s measure of financial health swung to a remarkable 6.08% for the fiscal year ending September 30, up from a negative 0.78% in FY2020, and a substantial move from lows touched just three years ago, when it sunk to negative 18.8% in 2018.
The HECM Capital Ratio is the proportion of FHA Capital in the Mutual Mortgage Insurance Fund (MMI Fund, or “the Fund”) to the Insurance-in-Force.  Its rise has come following changes to the program in 2017 and 2018 aimed at increasing its financial viability, and to be sure, sustained home price appreciation, which has an outsized impact on the calculation.
On November 15, FHA released its Annual Report to Congress on the Financial Status of the Fund, revealing that the overall Capital Ratio in Fiscal Year 2021 had improved to 8.03%, a new historic high.

Read the full article: Reverse Mortgage Capital Ratio Turns Positive, But No Time for Complacency