What Is the Federal Housing Authority?


Quick Answer

The federal housing authority, properly called the Federal Housing Administration or FHA, is a U.S. agency dedicated to the formulation of construction standards and the underwriting of mortgage financing. It was first created in 1934 as part of the National Housing Act of that year.

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Full Answer

The FHA first came into being during the Great Depression, an era when home ownership plummeted dramatically, and when mortgage options for consumers lacked many of the long-term amortization and refinancing benefits available to contemporary home-owners. Thus, the housing act and the FHA were intended to help regulate interest rates, making housing far more affordable, particularly for those who could afford an initial down payment.

One critical role of the FHA is mortgage insurance, a mechanism that protects lenders in circumstances where homeowners default on payments. Such insurance is often required by lending institutions when home-buyers borrow against more than 80 percent of the property value, with FHA coverage being a particularly affordable option for buyers considered high-risk. As of 2016, the FHA, in partnership with HUD, has insured over 34 million single family mortgages and over 47,000 multi-family projects.

In addition to financial roles, the FHA also strives to create and maintain safe housing conditions and related building regulations across the country.

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