About the Federal Housing Administration

The Federal Housing Administration, generally known as "FHA", is the largest government insurer of mortgages in the world, insuring over 35 million properties since its inception in 1934.  A part of the United States Department of Housing and Urban Development (HUD), FHA provides mortgage insurance on single-family, multifamily, manufactured homes and hospital loans made by FHA-approved lenders throughout the United States and its territories.

What is FHA Mortgage Insurance?  For the homebuyer, FHA-insured loans offer competitive rates, smaller downpayments, greater flexibility in calculating household income and payment ratios, and protection requirements against foreclosures.  For lenders our mortgage insurance protects lenders against loss if the homeowner defaults on his or her mortgage loan.  While FHA insured-loans must meet certain requirements established by FHA to qualify for the insurance,  lenders bear less risk because FHA will pay the lender if a homeowner defaults on his or her loan.  

Why does FHA Mortgage Insurance exist?
Unlike conventional loans, FHA-insured loans require small down payments. There is more flexibility in an FHA loan than conventional loans in calculating household income and payment ratios. The cost of the mortgage insurance is passed along to the homeowner and typically is included in the monthly payment. In most cases, the insurance cost will drop off after five years or when the remaining balance on the loan is 78 percent of the value of the property-whichever is longer.

How is FHA funded?
FHA operates entirely from self-generated income and costs the taxpayers nothing. The proceeds from the mortgage insurance paid by the homeowners are captured in an account that is used to operate the program entirely. 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.

History of the Federal Housing Administration
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.
• Terms were difficult to meet for homebuyers seeking mortgages.
• Mortgage loan terms were limited to 50 percent of the property's market value, with a repayment schedule spread over three to five years and ending with a balloon payment.
• America was primarily a nation of renters. Only four in 10 households owned homes.
• During the 1940s, FHA programs helped finance military housing and homes for returning veterans and their families after the war.

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 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.

The FHA moved in to steady falling home prices and made it possible for potential homebuyers to get the financing they needed when recession prompted private mortgage insurers to pull out of oil producing states in the 1980s.

By 2001, the nation's homeownership rate had soared to an all time high of 68.1 percent.

The FHA has insured over 34 million home mortgages and 47,205 multifamily project mortgages since 1934. FHA currently has 4.8 million insured single family mortgages and 13,000 insured multifamily projects in its portfolio.

In the more than 60 years since the FHA was created, much has changed and Americans are now arguably the best housed people in the world. FHA has helped greatly with that success.

Profiles of Top FHA Leadership

Brian D. Montgomery
The Honorable Brian D. Montgomery Assistant Secretary For Housing - Federal Housing Commissioner

As Assistant Secretary for Housing-Federal Housing Commissioner, Brian D. Montgomery is responsible for overseeing the $400 billion Federal Housing Administration (FHA) insurance portfolio. In addition, he oversees HUD's regulatory responsibilities in the areas of the Real Estate Settlement Procedures Act (RESPA), the housing mission of Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac, and the manufactured housing industry.

Mr. Montgomery came to the U.S. Department of Housing and Urban Development from the Executive Office of the President, where he served as Deputy Assistant to the President and Cabinet Secretary from January 2003 until April 2005. While serving in the White House, Mr. Montgomery contributed to the policy process on a wide range of issues including the Administration's efforts to boost homeownership, increase access to affordable housing, and to reform both RESPA and the GSEs. Mr. Montgomery also served as Deputy Assistant to the President and Director of Advance from January 2001 until January 2003.

Following the Shuttle Columbia accident in February 2003, Mr. Montgomery headed up a White House working group to monitor all facets of the accident investigation. This ultimately led to the process that developed the President's vision for space exploration. For this effort, Mr. Montgomery was awarded the NASA Exceptional Service Medal in June 2004.

Since his Senate confirmation in June 2005, one of Mr. Montgomery's primary initiatives has been the creation and promotion of a bill designed to modernize FHA. The Modernization Bill, which passed the House of Representatives in July 2006, is primarily focused on increasing borrower flexibility through both policy and programmatic changes. Included among them are increased loan limits, updated down payment assistance options, and a risk-based premium structure. The goal of Mr. Montgomery's bill is to provide low and moderate-income borrowers a safe homeownership option at a fair price.

Another one of Mr. Montgomery's priorities while at HUD has been the preservation of affordable multifamily rental housing, achieved primarily through mortgage insurance as well as flexible refinancing options. During Mr. Montgomery's tenure, HUD has gone to great lengths to get legislation passed in the House of Representatives that will preserve more than 900 apartment complexes, allowing for 87,000 additional units of affordable housing.

Mr. Montgomery's time at HUD has also been marked by extensive work with Hurricane Katrina disaster victims. He chaired HUD's Hurricane Recovery and Response Center at Headquarters and helped coordinate and secure temporary and long-term housing for displaced persons.