CBO Finds FHA Insurance Fund Overspend

Recent estimates from the Congressional Budget Office (CBO) show the Federal Housing Administration’s (FHA) guarantees of single-family mortgages in the past two decades have been more costly for the government than anticipated.

Between 1992 and 2012, the single-family mortgage guarantees made by FHA had a net budgetary cost of $15 billion, according to recent estimates by FHA referenced by CBO. In contrast, FHA estimated savings of $45 billion from those guarantees.

That swing of $60 billion from savings to cost reflect what CBO notes as higher-than-expected defaults by borrowers and lower-than-expected recoveries when the houses of defaulted borrowers have been sold.


As a result of the costlier guarantees than were expected by FHA, the balance in the agency’s Mutual Mortgage Insurance (MMI) fund shrunk over time.

In November 2012, an actuarial review revealed the MMI fund had a negative economic value of $16.3 billion.

By law, the capital reserve ratio for the MMI fund, which holds additional funds to be used to cover unexpected losses on FHA’s single-family mortgage guarantees, is supposed to be at least 2%. Last year’s actuarial review revealed it to be -1.44%.

The shortfall for the MMI fund has since led to the FHA requesting a $1.7 billion infusion from the U.S. Treasury to cover its losses on September 30, 2013.

Since the transfer of funds from the Treasury to the FHA represents an “intragovernmental shifting of funds,” notes CBO, the infusion did not affect the deficit.

The increase in the estimated cost of FHA’s programs, however, raised federal spending by $22.4 billion in Fiscal Year 2013, which ended September 30.

Written by Jason Oliva

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  • Jason,

    The “swing” between $15 million negative and $45 billion positive is just $45.015 billion, not $60 billion. Perhaps you meant to write: “Between 1992 and 2012, the single-family mortgage guarantees made by FHA had a net budgetary cost of $15 billion…” rather than “… a cost of $15 million….”

    • Cynic, thanks for the catch. Apologies on any confusion. The story has been updated to reflect the correct “$15 billion” and not “million” figure.

  • The entire MMI Fund which is expected to be valued at a much lower negative amount for fiscal 2013 than fiscal 2012 BUT the HECM portion of the MMI Fund is projected to grow even more negative throughout fiscal 2013. The MMI Fund includes far more than just HECMs. If you do not think that last sentence is true, read through the latest Production Report (the one for July 2013).

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