History of FHA Loans
An FHA loan is a federal assistance mortgage loan in the United States that is insured by the Federal Housing Administration. This type of loan can only be issued by federally qualified lenders.
The FHA program was developed during the Great Depression of the 1930s and was typically issued to Americans with lower incomes with the intent of helping them to afford the purchase of a home. During the Great Depression foreclosures were very common and the FHA program was created to provide lenders with sufficient insurance. Private Mortgage Insurances (PMI), which is insurance payable to a lender that may be required when taking out a mortgage loan, have become more popular over time. This, in turn, has made FHA loans primarily serve those who do not qualify for a PMI or cannot afford a conventional down payment on a home.
FHA Time Line:
- 1934: National Housing Act of 1934 created Federal Housing Administration (FHA)
- 1930s-1960s: FHA served mainly as an insuring agency for loans made by private lenders
- 1968: Important Subsidy programs established by the Fair Housing Act of 1968
- 1974: Housing and Community Development Act passed
- 1977: Changes in Housing and Community Development Act raised ceilings on single-family loan amounts for savings and loan association lending
- 1980: Housing and Community Development Act amended to negotiate interest rates on certain FHA loans, created a new FHA rental subsidy program for middle-income families
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