Federal Housing Administration

From Wikipedia, the free encyclopedia

You have new messages (last change).
The FHA's logo
The FHA's logo

The United States Housing Administration (USHA) is a United States government agency created as part of the National Housing Act of 1934. The goals of this organization are: to improve housing standards and conditions; to provide an adequate home financing system through insurance of mortgage loans; and to stabilize the mortgage market.[1].

Contents

[edit] History

During the Great Depression, the banking system failed, causing a drastic decrease in home loans and ownership. At this time, most home mortgages were short-term (three to five years), no amortization, balloon instruments at loan-to-value (LTV) ratios below fifty to sixty percent.[2] The banking crisis of the 1930’s forced all lenders to retrieve due mortgages. Refinancing was not available, and many borrowers, now unemployed, were unable to make mortgage payments. Consequently, many homes were foreclosed, causing the housing market to plummet. Banks collected the loan collateral (foreclosed homes) but the low property values resulted in a relative lack of assets. Because there was little faith in the backing of the U.S. government, few loans were issued and few new homes were purchased.

In 1934, the federal banking system was restructured. The National Housing Act of 1934 was passed and the Federal Housing Administration was created. Its intent was to regulate the rate of interest and the terms of mortgages that it insured. These new lending practices increased the number of people who could afford a down payment on a house and monthly debt service payments on a mortgage, thereby also increasing the size of the market for single-family homes. (Garvin 2002)

Please help improve this article or section by expanding it.
Further information might be found on the talk page or at requests for expansion.
This article has been tagged since March 2007.

[edit] The FHA Today

In 1965, the Federal Housing Administration became part of the Department of Housing and Urban Development (HUD). Since 1934, the FHA and HUD have insured over 34 million home mortgages and 47,205 multifamily project mortgages. Currently, the FHA has 4.8 million insured single family mortgages and 13,000 insured multifamily projects in its portfolio.[3] The Federal Housing Administration is the only government agency that is completely self-funded. It operates solely from its own income and comes at no cost to taxpayers. This department spurs economic growth in the form of home and community development.

[edit] FHA Mortgage Insurance

Mortgage insurance is available for housing loan lenders, protecting against homeowner mortgage default. For a small fee, lenders can obtain insurance for a value of ninety percent of the appraised value of the home or building. In the event of a mortgage default, this value is transferred to the FHA and the lenders receive a large percentage of their investment. The other ten percent is received from the original down payment for the home.

[edit] FHA Mortgage Loans

The Federal Housing Administration offers various types of housing loans. These include:

In order to qualify for an FHA housing loan, applicants must meet certain criteria, including employment, credit ratings and income levels. The specific requirements are:

    • Steady employment history, at least two years with the same employer.
    • Consistent or increasing income over the past two years
    • Credit report should be in good standing with less than two thirty day late payments in the past two years
    • Any bankruptcy on record must be at least two years old with good credit for the two consecutive years.
    • Any foreclosure must be at least three years old
    • Mortgage payment qualified for must be approximately thirty percent of your total monthly gross income

[edit] Effects

The creation of the Federal Housing Authority successfully increased the size of the housing market. By convincing banks to lend again, as well as changing and standardizing mortgage instruments and procedures, home ownership has increased from 40% in the 1930s to nearly 70% today. By 1938, only four years after the beginning of the Federal Housing Association, a house could be purchased for a down payment of only ten percent of the purchase price. The remaining ninety percent was financed by a twenty-five year, self amortizing, FHA-insured mortgage loan. After World War II, the FHA helped finance homes for returning veterans and families of soldiers. It has helped with purchases of both single family and multi-family homes. 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 the 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. In the 1980s, when the economy didn’t support an increase in homeowners, the FHA helped to steady falling prices, making it possible for potential homeowners to finance when private mortgage insurers pulled out of oil producing states.[4]

The greatest effects of the Federal Housing Administration can be seen within minority populations and in cities. Nearly half of FHA’s metropolitan area business is located in central cities,[5] a percentage that is much higher than that of conventional loans. The FHA also lends to a higher percentage of African Americans and Hispanic Americans, as well as younger, credit constrained borrowers. Because some feel that these groups include riskier borrowers, it is believed that this is part of the reason for FHA’s contribution to the homeownership increase.

[edit] References

[edit] See also

[edit] External links

 v • d • e 
Agencies under the United States Department of Housing and Urban Development		 United States Department of Housing and Urban Development Seal
Community Development Block Grants • Office of Fair Housing and Equal Opportunity • Federal Housing Administration • Government National Mortgage Association • Office of Policy Development and Research • Office of Public and Indian Housing
Retrieved from "http://en.wikipedia.org../../../f/e/d/Federal_Housing_Administration_65bc.html"
In other languages