Last month, the Federal Housing Authority (FHA) “revealed” that its program is “healthy.” “Healthy” means that the FHA’s Mutual Mortgage Insurance Fund (MMIF) has a surplus of $34.86B, +$8B more than last year. Since the FHA occupies 12% of the mortgage market in this country, it’s a good thing the program is “healthy.”

Within the FHA’s latest report last month, the Urban Institute identified four FHA trends to watch in 2019.

  1. A strong housing market enhances the FHA’s performance.
    1. Home prices have averaged an increase of +7% in the last 4 years.
    2. The net worth of the MMIF increased from 2.8 to 2.76 in this past year.
    3. The MMIF brought in $209B in new FHA mortgages during 2018.
  2. Down payment assistance is rising.
    1. Down payment assistance from relatives, government entities and other resources has increased from 30% to 39% over the last 5 years.
    2. Down payment assistance from relatives for high priced properties has increased to 53% over the last 5 years.
  3. The number of cash-out refinances is increasing.
    1. While overall refinances have decreased from 2017 to 2018, cash-out refinances have increased from 142,000 to 152,000 loans.
    2. Cash-out refinances increased from 23% last year to 35% in 2018.
  4. Credit access is expanding.
    1. The Urban Institute notes that credit scores are declining while debt-to-income ratios are trending higher.
    2. According to the FHA’s report, this simultaneous decline and increase is due to “…increases in home prices and interest rates.”
    3. Both the FHA and Urban Institute note that this kind of increased credit access can bring with it increased default risks.

Pay attention to #4. You can bet that the FHA and Urban Institute, as well as other entities, are paying attention to expanding credit access as well. As the FHA report said, “…increasing credit access is worrisome.”