Wouldn't it be great if there was a government agency to help stabilize the mortgage market, regulate housing standards and conditions and enable United States residents a home financing system through insurance of mortgage loans? There is and it is called the Federal Housing Administration.
History of the FHA
The Federal Housing Administration was formed in 1934 as part of the created as part of the National Housing Act. The act was in direct response to the Great Depression and the devastating affect it had on the housing market. During the depression, the banking system failed which had a direct correlation with the housing market. Many US citizens were unemployed and when the crash forced the lenders to collect on all due mortgages, the problem just got worse. The mortgage holders took ownership of all the foreclosed houses that were highly devalued and because of the financial freeze new loans werent issued and there were very few home sales.
To prevent this particular crisis from occurring again, the government created and passed the National Housing Act of 1934 and the agency minding it was the Federal Housing Administration. The main job of the Federal Housing Administration was both the terms of mortgages and the interest consumers could be charged. The overhaul of the existing system increased the ability for citizens to purchase homes and grew the market for single-family homes.
Loans with the FHA
Loans generated by the Federal Housing Administration are backed through a mix of a small upfront mortgage insurance premium (UFMIP) and a small monthly mortgage insurance premium. Homeowners using a Federal Housing Administration loan must pay monthly mortgage insurance for five years or until the loan is paid down to 78% of the appraised value.
What the FHA has done for citizens
Since its formation in 1934 and its 1965 shift to becoming an arm of HUD (Department of Housing and Urban Development), the Federal Housing Administration has insured over 35 million home mortgages. It is also important to note that until recently, the Federal Housing Administration was the only government agency that was solely self-funded and generated its own income.
