The FHA was founded in 1934 as the banking systems were failing. At the time mortgages were only for three to five years and when they started failing banks needed to get back their borrowed money. At the time refinancing was not around so the borrowers who were now unemployed weren’t able to make their payments. This caused many houses to be foreclosed which in turn caused the housing market to fall even lower. When banks took the lower valued homes they were still losing money.When the FHA was founded it was planned to control the interest rates and terms of mortgages. This would help families to afford the down payment and mortgages on new homes to stimulate the housing market. The FHA calculated the value of homes and would lend more for higher appraised homes.In 1965 it merged with the Department of Housing and Urban Development. Up to this point it had granted 4.8 million mortgages to insured single families. It also had given 13,000 mortgages for multifamily homes.The FHA is the only government agency that completely self funded. It operates on the income it makes from mortgages it has a given tax shortfall built in. This meant that if it was unable to make enough money it would be able to tax the people in order to stay functioning. This happened for the first time in 2008 when they reported a 143 million dollar budget shortfall. They were projected to make half a billion from taxpayers if they kept the FHA the same.The creation of the FHA did help the housing market. It convinced banks to lend more and changed the way mortgages were given which caused home ownership to increase 30% by 2001. Four years after it was created you were able to buy a house with only a ten percent down payment and could pay it off in five to twelve years. It helped to finance homes for veterans returning from WW2. It also helped to create many homes for the elderly and disabled. It helped to keep the market alive and save homes in the 70’s and 80’s.The FHA lends to a higher percentage of minorities and high risk young people or people with poorer credit than some. However it started to play less of a role in 2006 but it is coming back to help combat the deterioration of credit markets and the housing “melt-down”. The government is working to make more competitive in this industry and it has helped thousands of people keep their homes from being foreclosed.http://en.wikipedia.org/wiki/Federal_Housing_Administrationhttp://www.hud.gov/offices/hsg/fhahistory.cfmFHA seal
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