What Is the Federal Housing Administration?

The Federal Housing Administration (FHA) is a government agency that helps stabilize the mortgage market, regulate housing standards and conditions and provides United States residents a home financing system through backing mortgage loans. If you need help obtaining a mortgage, the FHA could the answer.

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.

The depression was caused by a failure of the banking system, which had a direct negative impact on the housing market. Many U.S. citizens were unemployed and when the crash forced the lenders to collect on all due mortgages, the problem just got worse. Many lenders took ownership of foreclosed, highly devalued homes and because of the financial freeze, no new loans were issued, resulting in very few home sales.

To prevent this crisis from occurring again, the government created and passed the National Housing Act of 1934 and the agency to oversee it–the FHA.

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 an FHA loan must pay monthly mortgage insurance for five years or until the loan is paid down to 78 percent of the appraised value.

The FHA Today

Since its formation in 1934 and its 1965 shift to becoming an arm of  the Department of Housing and Urban Development (HUD), 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.

The FHA makes home ownership a real possibility for Americans who would otherwise be unable to secure a home loan, so if you’re in need of a mortgage, you may want to look into securing an FHA loan.