FHA mortgage-insurance reserve ratio hits record low

For the first time since the Federal Housing Agency started publishing the reserve ratio data in 1990, the FHA's mortgage-insurance reserves fell to the lowest level. The ratio dropped to a record low percentage of 0.53. This is far below than the 2% ratio mandated by the Congress. The reserve ratio was at 3% in the fiscal year 2008.

The reserve fund is used to cover losses due to default on FHA-backed mortgages. According to the Mortgage Bankers Association, almost 17% of FHA-insured borrowers are delinquent by at least one payment or are already in foreclosure. Industry experts believe one of the main reasons for this record drop in the reserve ratio is the depression in the home prices, which have reduced the value of FHA's collateral.

Thanks,

Jerry