History of the Federal Housing Administration (FHA)
March 13, 2013
More commonly known as the FHA, the Federal Housing Administration has been in existence since 1934. The purpose of the organization is for mortgage insurance loans, which are distributed by lenders also approved by the FHA. Currently, the FHA has insured the mortgages of over 34 million properties globally.
Early History- The Great Depression
The FHA grew out of the concerns from the Great Depression in the 1930’s. When the banks failed, so too did the home loan industry. During the time period of the Great Depression, mortgages were much different- many were only for the short term and there were no refinancing options, which put homeowners without a job in difficult situations.
When the federal banking system was reorganized in 1934, the FHA was created to regulate the industry with regards to mortgages. In addition to making the entire process safer for all, this also broadened the numbers of people who were able to obtain mortgages and purchase homes. Mortgage insurance serves to protect lenders in the event of a mortgage default, and the inclusion of the FHA in the market has really helped borrowers deemed as “higher risk”.
- Developed out of the concerns generated during the Great Depression, the FHA has been a cornerstone for the housing market ever since.
Post World War II History
As soldiers returned home from the war-front in the 1940’s, the country was about to experience a social and cultural shift throughout the country- the move to the suburbs. Returning soldiers often got married and aimed to purchase a nice house in the suburbs of cities to raise children in. This increased interest in home-ownership, combined with a relatively robust economy, was an ideal situation for the housing market.
The FHA continued to provide insurance for loans from private lenders, helping numerous American families purchase their homes. FHA also played an important role in making housing affordable and accessible for the handicapped, elderly, and low income people across the country.
- As the housing bubble began to grow again, the FHA expanded access to numerous families in the United States
1970’s and 1980’s History
During the 1970’s, energy costs were spiking at all time highs. Many private apartment buildings were struggling to survive as a result of this development, but the FHA was able to offer emergency financing and that saved these buildings- and thus the homes- of vast quantities of people. As time shifted into the 1980’s increased economic problems made it harder for loans to be insured, but the FHA remained stable and continued to provide these vital services despite hard times.
Currently, the FHA is the only government agency that is entirely self-funded. After the subprime mortgage problems sent ripples throughout the housing industry, the FHA continued to be a stable force for the field. Throughout all of the housing or economic booms and busts since then, the FHA has remained constant in providing reliable and regulated options. Part of their role has been as a leader to make the way when times are tough. Their pioneering through turbulent times eventually encourages banks to lend again, so it can be said that the FHA has a role in leading the country out of crisis mode and back on the path to recovery.