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I am seeing a lot of discussion about cancelling student debt, not because it is a great policy but because it can be done by executive order without appropriations.
FHA also has a pot of up to $53B that it could distribute if it wanted. Here's how: (1/9)
FHA also has a pot of up to $53B that it could distribute if it wanted. Here's how: (1/9)
FHA's main 203B mortgage insurance program is financed by its Mutual Mortgage Insurance Fund (MMIF). As the name suggests, FHA was originally created as a "mutual" insurance program, which normally means profits are rebated to policyholders (2/9)
And in fact, FHA did pay dividends or "distributive shares" from 1944 until 1990.
The Cranston-Gonzalez National Affordable Housing Act of 1990 modified the statute to limited distributive shares based on the actuarial status of the Fund (3/9)
The Cranston-Gonzalez National Affordable Housing Act of 1990 modified the statute to limited distributive shares based on the actuarial status of the Fund (3/9)
The MMI Fund was in deficit (this did not require appropriations at time time because while the Federal Credit Reform Act has passed it was not in effect until 1992) so distributive shares were suspended.
FHA never resumed payments when the Fund recovered. But it could (4/9)
FHA never resumed payments when the Fund recovered. But it could (4/9)
FHA released its most recent actuarial review last week. It found the Fund has an economic value of nearly $79B and $1.3T in insurance-in-force, for a capital ratio of 6.1% (5/9)
The CG National Affordable Housing Act requires that the Fund maintain a capital ratio of 2%.
So the Fund has roughly $53B in "excess" capital right now. (6/9)
So the Fund has roughly $53B in "excess" capital right now. (6/9)
FHA could reduce insurance premiums for new borrowers, but the housing market and homebuying seems reasonably robust at the moment. And that would be a slow form of stimulus compared to a bunch of dividends paid out immediately (7/9)
Every book of business for the least ten years has had a credit subsidy rate of at least -1% (ie, paid or expected to pay more than losses and expected losses). (8/9)
distributive shares are capped at the amount of premiums actually paid, but FHA has a large pool of money it could return to a large pool of former borrowers if it chose to.
Whether it will or should, given potential unexpected loss from the pandemic, is another question (9/9)
Whether it will or should, given potential unexpected loss from the pandemic, is another question (9/9)
