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The Federal Housing Administration’s mortgage insurance fund plays a critical role in ensuring a healthy and stable housing market, and its losses resulting from the foreclosure crisis must be viewed in that context, researchers at the UNC Center for Community Capital conclude in a new article published in the current edition of Cityscape.

In “The Public Purpose of FHA,” Roberto G. Quercia and Kevin A. Park describe the key role FHA’s Mutual Mortgage Insurance Fund plays in the mortgage market and how that relates to the massive portfolio losses and recent $1.7 billion draw on the U.S. Treasury.

The article comes as the U.S. Department of Housing and Urban Development releases its annual report to Congress on the financial condition of the fund. The report showed the fund gained $15 billion in value over last year and now stands at negative $1.3 billion. The actuary anticipates the fund will return to the required two percent capital reserve ratio in 2015, two years sooner than projected last year. Meanwhile, FHA maintains more than $48 billion in liquid assets to pay expected claims.

“As in previous recessions, FHA stepped up its operations in an effort to stabilize the housing market, researchers said. “Since 2008, FHA has helped 4.6 million households buy a home and nearly 3.2 million homeowners, including many who are under water, refinance to lower rates.

“Although FHA has struggled with managing some of its risks, these losses are primarily an indication of the enormous burden FHA has undertaken to stabilize a collapse in the national housing market unprecedented since the Great Depression,” they said.

The article is available online at

Mortgage finance is a key area of study for the UNC Center for Community Capital, the leading center for research and policy analysis on the transformative power of capital on households and communities in the United States. Part of the College of Arts and Sciences at the University of North Carolina at Chapel Hill, the center offers data and analysis that helps policymakers, advocates and the private sector find sustainable ways to expand economic opportunity to more people more effectively. For more information, visit or call (919) 843-2140.




Topics(s): Affordable Homeownership, Default, Bankruptcy, & Foreclosure, Housing Policy, Mortgage Finance
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