why was the fha established

Why was the federal housing act needed?

The National Housing Act was signed on June 27, 1934, by President Franklin D. Roosevelt to improve housing conditions, make housing and mortgages more accessible and affordable, and to reduce the foreclosure rate during the Great Depression.

Who was the FHA intended to help?

The Federal Housing Act created the Federal Housing Administration. The Federal Housing Administration was to insure mortgages of lower-income Americans, helping these people acquire financing through private banks and other financial institutions.

How did the FHA help the economy?

Without the cash-strapped agency's help in recent years, the housing crisis and resulting economic downturn would have been much worse.

What were the goals of the FHA?

History of the FHA Its primary purpose was to improve housing standards and conditions, provide a method of mutual mortgage insurance, and reduce foreclosures on family home mortgages. The legislation created the Federal Savings and Loan Insurance Corp.

Why was the FHA successful?

The length of the purchase contracts was extended, letting people pay off their loans over fifteen years. The FHA system also introduced the amortization of loans, meaning that people paid interest and principal over time. This eliminated the interest-only/balloon payment structure of the earlier mortgage contracts.

What is the purpose of the FHA quizlet?

FHA mortgage insurance protects lenders against losses resulting from default by the borrower. Money which provides the FHA insurance protection to lenders comes from the insurance premiums which are paid on each loan insured by the FHA.

What was the goal of the FHA new deal?

This law created the Federal Housing Administration (FHA) that insured banks, mortgage companies, and other lenders, thereby encouraging the construction of new homes and the repair of existing structures. It was FDR's hope that the law would also spur employment in the construction industry.

How many people did the FHA help during the Great Depression?

Second, by the end of the 1930s it was noted that “12,000,000 people have been enabled to improve their housing standards and conditions under the FHA program, including [new home purchases and] the modernization and repair provisions of the National Housing Act.” After years of economic depression, more Americans ...

How many people has the FHA helped?

Since 1934, FHA has served nearly 44 million homeowners and financed more than 50,000 multifamily mortgages representing 4.8 million modestly priced rental housing units. FHA also finances residential care facilities, hospitals, manufactured housing, home improvements, and reverse mortgages.

How many people did the FHA help during the Great Depression?

Second, by the end of the 1930s it was noted that “12,000,000 people have been enabled to improve their housing standards and conditions under the FHA program, including [new home purchases and] the modernization and repair provisions of the National Housing Act.” After years of economic depression, more Americans ...

What is the purpose of the FHA quizlet?

FHA mortgage insurance protects lenders against losses resulting from default by the borrower. Money which provides the FHA insurance protection to lenders comes from the insurance premiums which are paid on each loan insured by the FHA.

What did the FHA do in the New Deal?

This law created the Federal Housing Administration (FHA) that insured banks, mortgage companies, and other lenders, thereby encouraging the construction of new homes and the repair of existing structures. It was FDR's hope that the law would also spur employment in the construction industry.

When was the FHA created?

The History of FHA. Congress created the Federal Housing Administration (FHA) in 1934. The FHA became a part of the Department of Housing and Urban Development's (HUD) Office of Housing in 1965. When the FHA was created, the housing industry was flat on its back: Two million construction workers had lost their jobs.

What is the FHA?

What is the Federal Housing Administration? The Federal Housing Administration, generally known as "FHA", provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family homes, multifamily properties, residential care facilities, and hospitals. ...

How does FHA insurance work?

The Mortgage insurance premiums it collects from borrowers via lenders are used to operate the program. 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.

What is the FHA mortgage?

FHA insures mortgages on single family homes, multifamily properties, residential care facilities, and hospitals. It is one of the largest insurers of mortgages in the world, insuring more than 46 million mortgages since its inception in 1934.

What was the role of the FHA during the Great Recession?

During the “Great Recession” of 2008-2013, FHA played an important countercyclical role, propping up the housing market to supply access to mortgage credit when other sources of financing were limited and the capital markets had seized up.

What was the role of FHA in the 1940s?

During the 1940s, FHA programs helped finance military housing and homes for returning veterans and their families after the war.

When did FHA emergency financing keep cash-strapped properties afloat?

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.

When did the FHA become part of the Department of Housing and Urban Development?

In 1965 the Federal Housing Administration became part of the Department of Housing and Urban Development . Following the subprime mortgage crisis, FHA, along with Fannie Mae and Freddie Mac, became a large source of mortgage financing in the United States.

When was the Federal Housing Administration created?

In 1934 the federal banking system was restructured. The National Housing Act of 1934 created the Federal Housing Administration. Its intention was to regulate the rate of interest and the terms of mortgages that it insured; however, the new practices were restricted only to white Americans.

What was the FHA's policy on minority housing?

The Federal Housing Authority established mortgage underwriting standards that significantly discriminated against minority neighborhoods. Between 1945 and 1959, African Americans received less than 2 percent of all federally insured home loans. As the significance of subsidized mortgage insurance on the housing market grew, home values in inner-city minority neighborhoods plummeted. Also, the approval rates for minorities were equally low. After 1935, the FHA established guidelines to steer private mortgage investors away from minority areas. This practice, known as redlining, was made illegal by the Fair Housing Act of 1968. Redlining has had long-lasting effects on minority communities.

What is the FHA underwriting manual?

In 1935, the FHA provided its appraisers with an Underwriting Manual, which gave the following instruction: "If a neighborhood is to retain stability it is necessary that properties shall continue to be occupied by the same social and racial classes. A change in social or racial occupancy generally leads to instability and a reduction of values." Appraisers were then told to give higher property and zoning ratings where "protection against some adverse influences is obtained", and defined adverse influences as "infiltration by inharmonious racial or nationality groups". Because the FHA's appraisal standards included a whites-only requirement, racial segregation became an official requirement of the federal mortgage insurance program, as the FHA frequently judged any properties in racially mixed neighborhoods or in close proximity to black neighborhoods as being high-risk. While this practice is no longer official policy, its practices are still widely implemented in measures of de facto segregation.

How much would the FHA lose without subprime?

Joshua Zumbrun and Maurna Desmond of Forbes have written that eventual government losses from the FHA could reach $100 billion.

What is the FHA appraisal value?

The FHA calculated appraisal value based on eight criteria and directed its agents (called "appraisers") to lend more for higher appraised projects, up to a maximum cap. The two most important were "Relative Economic Stability", which constituted 40% of appraisal value, and "protection from adverse influences", which made up another 20%.

What is the National Housing Act?

National Housing Act of 1934. Website. www.hud.gov. Footnotes. Also known as the Office of Housing. The Federal Housing Administration ( FHA ), also known as the Office of Housing within the Department of Housing and Urban Development (HUD), is a United States government agency founded by President Franklin Delano Roosevelt, ...

Why did FHA help in the 1980s?

FHA's emergency financing kept these cash-strapped properties afloat. In the early 1980s, a recession caused private mortgage insurers to pull out of oil producing states. FHA stepped in to steady falling home prices and help potential homebuyers to get the financing they needed.

When did FHA become a part of the Department of Housing and Urban Development?

Only 1 in 10 households owned homes. FHA became a part of the Department of Housing and Urban Development's (HUD) Office of Housing in 1965. Congress created FHA in 1934. During the 1940s, FHA helped veterans and their families after World War II.

What is FHA insurance?

FHA mortgage insurance protects lenders against losses. If a property owner defaults on their mortgage, we'll pay a claim to the lender for the unpaid principal balance. Because lenders take on less risk, they are able to offer more mortgages to homebuyers.

How many mortgages have we insured?

We're one of the largest mortgage insurers in the world. Since 1934, we've insured almost 50 million mortgages throughout the U.S.

What was the homeownership rate in 2001?

The nation's homeownership rate had soared to an all-time high of 68.1 percent as of the third quarter of 2001.

Which government agency operates from its self-generated income?

FHA is the only government agency that primarily operates from its self-generated income.

Was America a renter country?

America was mostly a nation of renters. Only 1 in 10 households owned homes.

Overview

History

During the Great Depression many banks failed, causing a drastic decrease in home loans and ownership. At that time, most home mortgages were short-term (three to five years), with no amortization, and balloon instruments at loan-to-value (LTV) ratios below sixty percent. This prevented many working and middle-class families from being able to afford home ownership. The banking crisis of the 1930s forced all lenders to retrieve due mortgages; refinancing was not …

Subprime mortgage crisis

Mortgage insurance

Legacy

See also

Further reading

External links