What is FHA?
In 1934, the Congress of the United States of America created the “Federal Housing Administration. At that time, the housing industry was very poor. Only 4 in 10 households were actually owned. Most citizens were tenants. Millions of workers had lost their jobs. And if you were employed, home loans were very difficult to obtain and pay back. Most loans were required to be paid back in just a few years and were limited to fifity percent of the homes value. Lenders were very hesitant to lend money. So this new entity, known as FHA provided mortgage insurance on loans made by certain “FHA-approved lenders” throughout the United States and its territories.
FHA mortgage insurance provided lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner’s default. Loans must meet certain requirements established by FHA to qualify for insurance.
FHA continues to insure mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest now the largest insurer of mortgages in the world, insuring over 47.5 million properties since its inception.
During the 1940s, FHA programs helped finance military housing and homes for returning veterans and their families after the war.
In the 1950s, 1960s and 1970s, the FHA helped to spark the production of millions of units of privately-owned apartments for elderly, handicapped and lower income Americans. When soaring inflation and energy costs threatened the survival of thousands of private apartment buildings in the 1970s, FHA’s emergency financing kept cash-strapped properties afloat.
The FHA became a part of the Department of Housing and Urban Development’s (HUD) Office of Housing in 1965.
FHA is the only government agency that operates entirely from its self-generated income and costs the taxpayers nothing. The proceeds from the mortgage insurance paid by the homeowners are captured in an account that is used to operate the program entirely. FHA provides a huge economic stimulation to the country in the form of home and community development, which trickles down to local communities in the form of jobs, building suppliers, tax bases, schools, and other forms of revenue.
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