Federal Housing Administration Risk Management Capital Assessment Projections (RMCAP)

Challenge: FHA required accurate, timely, and actionable model output to manage its reserve fund, inform policy decisions, and report to stakeholders. The U.S. Housing and Urban Development’s (HUD’s) Federal Housing Administration (FHA) reimburses lenders when borrowers default on their FHA-insured mortgages. FHA receives funds through borrowers’ mortgage insurance payments but can draw upon Treasury funds, as it did in 2013, to pay claims that exceed FHA’s reserve fund, known as the Mutual Mortgage Insurance Fund (MMIF). Model outputs must be accurate and reliable to support FHA’s report to Congress, financial statements, and policy decisions that balance mission with economic sustainability. As a result, FHA remains under scrutiny from Congress, HUD’s Office of the Inspector General, and other stakeholders.

Summit’s Solution: The team led by Summit develops and maintains the econometric models that forecast the MMIF’s value for both Single Family Forward mortgage and Home Equity Conversion Mortgages, relying on services provided by AWS and Looker to transform a complex model into a business intelligence tool. This project, known as the Risk Management and Capital Assessment Projections, provides FHA estimates to formulate its budget, understand policy impacts of economic changes, manage overall portfolio risk, and provide analytics for its Annual Report to Congress. Previously, running these models took days with the sheer volume of data.

To solve this problem, Summit turned to the cloud through its partnership with AWS. By moving data processing to AWS, Summit aims to reduce the models’ run time from days to hours. To address FHA’s need to see these numbers transformed into actionable intelligence, Summit works with Looker to provide a SQL-based data analytics platform, capable of digging deep into the data and returning visualizations. As trusted advisors, the Summit team uses and helps FHA use these business intelligence tools and builds customized reports in Looker, SAS, R, and SQL supported by AWS to help HUD make informed policy decisions.

Result: FHA has the intelligence it needs—at the necessary speed—to understand the implications of each day’s economic changes on its MMIF portfolio. The support of the Summit-AWS-Looker partnership helps ensure the stability and viability of this fundamental part of American home ownership.

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