Mutual Mortgage Insurance Fund
What Is the Mutual Mortgage Insurance Fund (MMIF)?
The Mutual Mortgage Insurance Fund (MMIF) is a federal fund that acts as the insurer of mortgages that are guaranteed by the Federal Housing Administration (FHA). It supports both FHA mortgages used to buy homes and home equity conversion mortgages. Home equity conversion mortgages are the most common type of reverse mortgages; reverse mortgages are utilized by those 62 years or more seasoned as an approach to extracting equity from their homes.
The borrowers of both of these loan types — FHA mortgages and home equity conversion mortgages — pay into the fund with a one-time up-front premium. This one-time upfront premium might be paid at closing or moved into the loan. Borrowers are likewise required to pay annual mortgage insurance premiums (in light of a certain percentage of the loan amount). The cost of mortgage insurance relies upon the loan type. The rates additionally incidentally change, contingent upon the mortgage market and the practicality of the MMIF.
How the Mutual Mortgage Insurance Fund (MMIF) Works
On account of FHA loans, the MMIF pays the lender if the borrower defaults and the lender loses money subsequent to selling the house in foreclosure. Borrowers who have FHA mortgages are viewed as higher-risk by lending institutions as a result of the low up front installment requirement and the less-severe income and credit requirements associated with these loans.
On account of reverse mortgages, the fund pays the lender in the event that the borrower owes erring on the reverse mortgage than the house is worth when the lender sells it. Reverse mortgages are viewed as higher risk since they are non-recourse loans. With a non-recourse loan, the lender can't ask the borrower to pay the difference.
The MMIF makes sure lenders don't lose money on certain types of risky mortgages. This, thus, urges these institutions to offer loans they in any case could not (and charge lower interest rates and fees than they in any case could decide to).
Upfront and continuous mortgage insurance premiums for both FHA loans and reverse mortgages must be sufficiently low to not put borrowers down, but rather high enough to support the MMIF. The MMIF was authorized by Section 203(b) of the National Housing Act of 1934.
In 2019, the MMIF arrived at its highest level fiscal year starting around 2007. The FHA stated that its MMIF capital ratio for the fiscal year 2019 was 4.84%, which is significantly higher than the legislatively ordered least level of 2%. In 2009, as the fund was hit by the wave of mortgage defaults associated with the 2008 financial crisis and Great Recession, the fund dipped under the base 2% level and stayed under the level until the fiscal year 2014.
Highlights
- In 2019, the MMIF arrived at its highest level fiscal year starting around 2007.
- The Mutual Mortgage Insurance Fund (MMIF) is a federal fund that acts as the insurer of mortgages that are guaranteed by the Federal Housing Administration (FHA).
- The borrowers of both of these loan types — FHA mortgages and home equity conversion mortgages — pay into the fund with a one-time up-front premium.
- The Mutual Mortgage Insurance Fund (MMIF) supports both FHA mortgages used to buy homes and home equity conversion mortgages; home equity conversion mortgages are the most common type of reverse mortgages.
