Home / Program Offices / Chief Financial Officer / Agency Financial Report FY 2012 / Section I / Mutual Mortgage Insurance Capital Ratio


In the National Affordable Housing Act of 1990, Congress created a capital ratio metric for gauging the financial status of FHA's Mutual Mortgage Insurance (MMI) Fund (12 USC 1711(f)(4)).  Today, the MMI Fund encompasses nearly all of FHA's single family business, including reverse mortgages insured since FY 2009.  The capital ratio compares the "economic net worth" of the MMI Fund to the dollar balance of active, insured loans, at a point in  time.  Eocnomic net worth is defined as a net asset position, where an estimate of the present value of expected future revenues and net claim expenses is added to current balance sheet positions.  The capital ratio computation is part of a valuation of the outstanding portfolio of insured loans under current market conditions at the end of each fiscal year.  

The MMI Fund Capital Resources are comprised of two accounts:  a Financing Account and a Capital Reserve account.  The funds in the Financing Account cover estimated losses over the life of the loan cohorts while the Capital Reserve covers losses in excess of what is estimated to be needed in the Financing Account.  The housing crisis that began in FY 2008 has resulted in the capital ratio falling below the 2 percent threshold for four years in a row.  This fiscal year, the ratio fell below zero, to -1.44 percent.

Mutual Mortgage Insurance Capital Ratio

Note:  The FY 2006 - FY 2008 ratios are based on unamortized IIF and do not include HECM loans.  The FY 2009 - 2012 ratio calculations use amortized IIF and include HECM loans endorsed starting in fiscal year 2009.