Federal Housing Administration

History and Background

The Federal Housing Administration was created by the National Housing Act of 1934. When the Housing Act of 1965 created the U.S. Department of Housing and Urban Development, FHA was drawn into HUD's jurisdiction.

When the FHA came into existence during the administration of Franklin D. Roosevelt, the United States was in the midst of the Great Depression. A primary short-term purpose of FHA was to create jobs by stimulating the residential lending and home building industries. In the long term, it created more and better housing. Since 1934, FHA has insured more than 37 million mortgages.

FHA revolutionized the housing finance industry in several ways. The insurance program reduced lenders’ risk of default and foreclosure. Lower risk translated to lower interest rates, which in turn stimulated increased borrowing. Low down payment requirements (initially 20% of the principal) reduced the cash borrowers needed to move into homeownership. Long-term, fully amortized mortgage loans allowed borrowers to repay loans over a long period of time with low monthly payments. Low interest rates, low down payments, and low monthly payments all combined to reduce the cost of homeownership and created a nation of homeowners after World War II.

The FHA program established minimum property standards. Although required only for FHA-insured homes, the standards were widely adopted for all new home construction. With uniform, objective standards and physical inspections to ensure compliance, new homes were of better quality than typical pre-Depression homes.

Various FHA Programs

Programs of FHA that are currently active include

• One-to-Four Family Home Mortgage Insurance, Section 203(b);
• Mortgage Insurance for Disaster Victims, Section 203(h);
• Rehabilitation Loan Insurance, Section 203(k);
• Single-Family Property Disposition Program, Section 204(g);
• Loss Mitigation;
• FHA-Home Affordable Modification Program (FHA-HAMP);
• Graduated Payment Mortgage (GPM), Section 245(a);
• Adjustable Rate Mortgage (ARM), Section 251;
• Home Equity Conversion Mortgage (HECM), Section 255;
• Manufactured Homes Loan Insurance (Title I);
• Property Improvement Loan Insurance (Title I);
• Counseling for Homebuyers, Homeowners, and Tenants, Section 106;
• Good Neighbor Next Door;
• Energy Efficient Mortgage (EEM);
• Insured Mortgages on Hawaiian Home Lands, Section 247; and
• Insured Mortgages on Indian Land, Section 248.

In addition to established programs, HUD and FHA are piloting several new programs as part of U.S. economic recovery strategies. FHA is expected to take an active role in economic recovery as additional programs are proposed and piloted.