NEW York (TheStreet) -- The Federal Housing Administration had a projected deficit of $1.3 billion at the end of September, down substantially from last year's estimate of $16.3 billion, according to an independent actuarial review released Friday.
The agency received a $1.7 billion infusion this year for the first time in its 79-year history to ensure that it had sufficient reserves to pay expected claims over 30 years.
But the long-term financial health of the FHA appears to be improving amid steps taken to shore up revenues, including increasing mortgage insurance premiums and strengthening underwriting standards.
The report says that with the latest improvement, the agency's Mutual Mortgage Insurance Fund could meet its required minimum 2% capital reserve ratio by fiscal year 2015, two years ahead of schedule. The current capital ratio is a negative 0.l1%.
The fund is also projected to have an economic networth of $27 billion at the end of 2015 and more than $80 billion in FY 2019.
What is clear from the independent actuarial report is that the aggressive steps we have taken have made FHA stronger and put it on a sustainable path to fulfill its dual mission of supporting access to homeownership for underserved and low-wealth borrowers as well as supporting and stabilizing the housing market," said HUD Secretary Shaun Donovan. "We look to the future and remain committed to continuing our progress to strengthen the MMI Fund so that ladders of opportunity are available to all Americans for generations to come."
The FHA insures lenders against losses on loans with a downpayment as low as 3.5%. The agency's market share rose nearly fivefold in the wake of the housing bust, as it stepped in to support the mortgage market when private capital disappeared.