Analysts Stress Need for FHA Reform

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It just makes sense that along with GSE reforms FHA changes should go hand in hand. Without both updates the overall goals would not be achievable. For a more detailed look at this subject please read the article below.

The FHA Condos Approval Company, Inc.

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As the government works toward GSE reform, Keefe, Bruyette & Woods (KBW), a financial services provider, says reform for the Federal Housing Administration (FHA) should also be a top concern.

“While FHA reform has been discussed, it has clearly played a secondary role to the more pressing issue of GSE reform,” KBW stated in a recent report.

KBW continued, “However, we continue to believe that the two have to be done in conjunction to avoid a potential shift in volume back to the FHA.”

The agency grew from a portfolio of about $400 billion before the housing crisis to about $1.1 trillion since, all while its capital reserves fell to -1.44 percent in 2012 despite a mandated minimum of 2 percent.

The FHA reported a projected capital reserve of -0.4 percent for this year before a rise to 0.2 percent in 2014.

Meanwhile, the agency has upped its premiums and received $1.7 billion from the Treasury to bolster its financial status and keep the agency viable.

In addition, the FHA plans to sell about 40,000 distressed loans in its portfolio this year, and it is focused on loss mitigation strategies in order to reduce potential losses.

While its portfolio remains large, the FHA has reduced its footprint in the market somewhat. In particular, the agency has reduced its share of low down payment loans from more than 80 percent of the market to about 50 percent, according to KBW.

To read the complete article please use the link below.

FHA Reform

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