If it weren't for a recent legal settlement with Bank of America, the Federal Home Administration's (FHA) mortgage insurance fund would be in the red.
The FHA on Monday said it is patching a $688 million budget shortfall in its mortgage insurance fund with nearly $750 million in funds coming from last week's robo-signing settlement with the five major servicers, in particular, BofA, according to the U.S. Department of Housing and Urban Development (HUD) officials.
HUD secretary Shaun Donovan told reporters Monday afternoon that negotiations with other servicers are expected to be signed in the next few days. Those settlements could add another $150 million to $250 million to FHA's almost barren coffers.
As part of the $26 billion settlement with the five majors servicers, BofA agreed to a pay $l billion to resolve allegations of "fraudulent and wrongful conduct" in relation to FHA originations by the bank and Countrywide Financial Corp. (CFC), according to a Department of Justice press release. (BofA bought CFC in August 2008.)
The HUD secretary stressed in a conference call with reporters Monday afternoon that the performance of new FHA loans is exceeding expectations and revenues will increase from $5.8 billion in fiscal year 2012 (which ends Sept. 30) to $9.4 billion in full-year 2013.
He pointed out that FHA is already slated to raise premiums on FHA jumbos by 25 basis points and 10 basis points on lower balance loans, which is reflected in the $9.4 billion estimate for full year 2013 revenues.
Even more hikes are coming. Next week HUD will announce additional premium increases, Donovan said. He indicated the expected premium increases will be trimmed due to the funds coming from the settlements.
"We will not need all those premium increases." Donovan said.
HUD is raising premiums on FHA-insured multifamily loans and health care loans too.