And MS MBS analysts noted US HUD "released...>

US MBS: And MS MBS analysts noted US HUD "released its 2017 actuarial report of

the FHA's MMIF today," which "shows that the capital ratio of the capital

reserve fund went from 2.35% to 2.09% in 2017, lowering the chances of a MIP

cut, in our view. Further substantiating our view is that HUD said, "Had the

Obama administration's fee cut taken effect, the FHA's capital reserves would

have fallen to 1.76 percent", as reported in HUD's Annual Report to Congress."

- "The decline in reserves was driven by poorer performance in the FHA's HECM

portfolio, while its Single-Family Forward Mortgage book continued to improve,

largely on lower delinquencies and loss severities," MS said. "Recall that FHA

made changes to the HECM program to try to stem losses in this part of the book.

Also note that revenue from the HECM portfolio is the more volatile portion of

the MMIF. The capital ratio for the forward portfolio is 3.33%, which shows the

stronger health of the forward portfolio (the single family portion), but we

don't expect a MIP cut based on this alone. Also notable is that the health of

this may be lower in FY18 due to losses from the hurricanes."