Federal Housing Administration

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Federal Housing Administration

Description: The Federal Housing Administration, or FHA, was organized in 1934 as part of the National Housing Act. The purpose was to stimulate the construction industry, thus creating more jobs. It was also intended to help stabilize the real estate mortgage market. In essence, the FHA guarantees mortgages, putting the credit of the United States Government behind an individual buyer.

The FHA operates under the direction of the Department of HOusing and Urban Development (HUD). Any lender participating in the FHA insurance program must follower certain conditions. The FHA designates "qualified lenders" to underwrite loans directly without submitting applications to the FHA each time.

Previously in the late 80's, the FHA was hit hard by economic recession and was actually technically bankrupt before the United States Treasury stepped in and provided additional funds. The FHA is again in bad shape due to the current recession.

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