	Introduction

The Federal Housing Administration (FHA) is an agency of the Department of Housing and Urban Development (HUD) that insures private mortgage lenders against the possibility of borrowers defaulting on certain mortgage loans. If a mortgage borrower defaults on a mortgage—that is, does not repay the mortgage as promised—and the home goes to foreclosure, FHA is to pay the lender the remaining amount that the borrower owes. However, the availability or attractiveness of FHA-insured mortgages may be limited by other factors, such as the maximum mortgage amount that FHA will insure, the fees that it charges for insurance, and its eligibility standards. Background

		History

The Federal Housing Administration was created by the National Housing Act of 1934, during the Great Depression, to encourage lending for housing and to stimulate the construction industry. FHA-insured loans have lower down payment requirements than most conventional mortgages. Down Payment

FHA requires a lower down payment than many other types of mortgages. However, FHA-insured mortgages cannot exceed a maximum mortgage amount set by law. For calendar year 2019, the floor is $314,827 and the ceiling is $726,525. In higher-cost areas, it will insure mortgages with principal balances up to 115% of the area median home price, up to a cap of $726,525 in the highest-cost areas.) This change responded to concerns about the financial status of the FHA insurance fund. FHA has stated that, since it continues to insure the entire remaining mortgage amount for the life of the loan, and since premiums were cancelled on the basis of the loan amortizing to a percentage of the initial property value rather than the current value of the home, FHA has at times had to pay insurance claims on defaulted mortgages where the borrowers were no longer paying annual mortgage insurance premiums. Program Funding

FHA's single-family mortgage insurance program is funded through FHA's Mutual Mortgage Insurance Fund (MMI Fund). In general, the number of new mortgages insured by FHA increased during the housing market turmoil (and resulting contraction of mortgage credit) that began around 2007, reaching a peak of 1.8 million mortgages in FY2009 before beginning to decrease somewhat. Together, these mortgages had an initial loan balance of $209 billion. FHA's Share of the Mortgage Market

FHA's market share tends to fluctuate in response to economic conditions and other factors. Subsequently, as economic conditions worsened and mortgage credit tightened in response to housing market turmoil that began around 2007, FHA's market share rose sharply, peaking at over 30% of home-purchase mortgages in 2009 and 2010, and over 20% of all mortgages (including both home purchases and refinances) in 2009.
The Federal Housing Administration (FHA), an agency of the Department of Housing and Urban Development (HUD), was created by the National Housing Act of 1934. FHA insures private lenders against the possibility of borrowers defaulting on mortgages that meet certain criteria, thereby expanding the availability of mortgage credit beyond what may be available otherwise. If the borrower defaults on the mortgage, FHA is to repay the lender the remaining amount owed.
A household that obtains an FHA-insured mortgage must meet FHA's eligibility and underwriting standards, including showing that it has sufficient income to repay a mortgage. FHA requires a minimum down payment of 3.5% from most borrowers, which is lower than the down payment required for many other types of mortgages. FHA-insured mortgages cannot exceed a statutory maximum mortgage amount, which varies by area and is based on area median house prices but cannot exceed a specified ceiling in high-cost areas. (The ceiling is set at $726,525 in high-cost areas in calendar year 2019.) Borrowers are charged fees, called mortgage insurance premiums, in exchange for the insurance.
In FY2018, FHA insured over 1 million new mortgages (including both home purchase and refinance mortgages) with a combined principal balance of $209 billion.
FHA's share of the mortgage market tends to vary with economic conditions and other factors. In the aftermath of the housing market turmoil that began around 2007 and a related contraction of mortgage lending, FHA insured a larger share of mortgages than it had in the preceding years. Its overall share of the mortgage market increased from about 3% in calendar year 2005 to a peak of 21% in 2009. Since that time, FHA's share of the mortgage market has decreased somewhat, though it remains higher than it was in the early 2000s. In calendar year 2017, FHA's overall share of the mortgage market was about 17%.
FHA-insured mortgages, like all mortgages, experienced increased default rates during the housing downturn that began around 2007, leading to concerns about the stability of the FHA insurance fund for single-family mortgages, the Mutual Mortgage Insurance Fund (MMI Fund). In response to these concerns, FHA adopted a number of policy changes in an attempt to limit risk to the MMI Fund. These changes have included raising the fees that it charges and making changes to certain eligibility criteria for FHA-insured loans.