what is the national housing act 
the national housing act was a piece of legislation passed by congress in 1934 that was intended to strengthen the residential real estate market and promote homeownership a cornerstone of the new deal the act established the federal housing administration fha which by creating a federally guaranteed mortgage insurance program allowed banks to issue lower cost loans and make them more accessible to more people 1understanding the national housing actthe national housing act was one of the most important and lasting pieces of legislation to be enacted during the great depression of the 1930s when the franklin d roosevelt administration drafted and congress passed a series of new laws expanding the power of the federal government to influence the american economy and american standard of living its primary purpose was to improve housing standards and conditions provide a method of mutual mortgage insurance and reduce foreclosures on family homes the housing market was in dire need of intervention during the great depression in 1932 as many as 1 000 homeowners were defaulting on their mortgages every day and by 1933 fully half of all mortgages in the united states were in arrears foreclosures were skyrocketing home financing in general was not available to the typical american as loan terms were onerous with the typical mortgage requiring a 50 down payment and full repayment after five years there was no amortization on the loans either in effect they were basically balloon mortgages the law created two major agencies the federal savings and loan insurance corp fslic which insured savings and loans account holders deposits subsumed by the federal deposit insurance corp fdic in 1989 and the fha which insured mortgage lenders banks thrifts etc against the threat of borrower default on their loans in return for a small fee if a borrower defaulted then the fha would pay the lender a specified claim amount to qualify a lender had to meet certain specific qualifications over time the term fha approved lender has become a mark of distinction for a bank the underlying idea behind the program was that by providing insurance to lenders more individuals would ultimately qualify for mortgages and buy homes and it worked once mortgage lenders knew the government would guarantee their loans it enabled them to offer more generous terms like requiring just 20 down and repayment terms of 20 to 30 years the fha was successful at stabilizing and then stimulating national housing markets and extending housing credit to americans for whom homeownership had once been out of reach unlike many other new deal programs lawmakers in washington saw a purpose for the fha even after the worst effects of the great depression had dissipated in 1965 the fha was incorporated into the newly formed department of housing and urban development hud 2fha loans mortgages insured by the fha and issued by an fha approved lender still exist today designed for low to moderate income borrowers they require a lower minimum down payment and lower credit scores than many conventional mortgages 3 they are especially popular with first time homebuyers criticisms of the national housing actwhile the creation of the fha was a boon to many americans it also left out many of them particularly african americans and other racial minorities in the 1930s 40s and 50s the fha focused its financing insurance efforts on new communities and suburbs being built on the edges of the country s urban centers while also refusing to lend to people wishing to buy homes in certain neighborhoods in fact the fha would designate certain areas as risky mainly on the basis of their racial component and deny its federal mortgage backing on homes in these areas this process was known as redlining because officials and lenders would literally draw a red line on a map around the neighborhoods in which they would not invest due to demographics black inner city neighborhoods were the ones most likely to be redlined but any quarter anywhere near a predominantly african american community often got redlined too 4and those new subdivisions and developments that the fha was so eager to subsidize it often did so with a requirement that none of the homes be sold to african americans or be sold to whites only redlining practices were sometimes justified on the grounds that the black or minority neighborhoods were poorly maintained and hence homes in them were bad investments as for the new suburbs the justification was that if african americans bought homes in or near them the property values of the homes would decline putting loans at risk an assertion that had little empirical evidence behind it the civil rights act of 1964 and the fair housing act passed in 1968 helped end these practices at least in terms of official government policy however by locking millions of americans out of homeownership for generations they contributed significantly to the disparities and inequities in wealth and wealth building among races that exist today special considerationsthe national housing act was the first but not the last government effort to stabilize the housing market during times of economic crisis here are some government programs that succeeded it the housing and economic recovery act hera was drafted to address the fallout from the subprime mortgage crisis of 2007 08 the act allowed the fha to guarantee up to 300 billion in new 30 year fixed rate mortgages for subprime borrowers it allowed states to refinance subprime loans with mortgage revenue bonds and offered a refundable tax credit for qualified first time homebuyers 5hera was ultimately intended to renew public faith in the troubled government sponsored enterprises gses that deal in home loans namely fannie mae and freddie mac it created the federal housing finance agency fhfa to put these two major buyers and backers of mortgages under conservatorship 6although it didn t stave off the great recession which ensued from the mortgage crisis hera did ultimately help restore confidence in the gses and set important precedents in low income housing tax credits hope for homeowners was a federal aid program established by hera that was designed to help homeowners in financial distress as a result of the collapse of the subprime mortgage market in 2007 08 operational from october 2008 to september 2011 it allowed financially distressed homeowners close to default to refinance their mortgages into affordable 30 year or even 40 year fixed rate loans these were among the loans that the fha was allowed to guarantee the idea was that lenders would write down the principal balance of the loans to help people refinance and lower their mortgage payments 7the fair housing act is also known as the civil rights act of 1968 or title vii of the civil rights act 8the national housing act helped people buy homes the hope program aimed to enable people to keep their homes it was more of a direct bailout than the national housing act on march 18 2020 as the u s went into lockdown due to the covid 19 pandemic the fha and the fhfa implemented foreclosure moratoriums for single family homeowners whose mortgages are fha insured or backed by fannie mae or freddie mac mortgage forbearance was also put in place these moratoriums have been renewed repeatedly 9in february 2021 president biden extended the enrollment period for mortgage payment forbearance for government backed loans until sept 30 2021 and extended the period of mortgage payment forbearance available to borrowers who entered forbearance before june 30 2020 by up to six months 10did the national housing act help everyone the national housing act did help millions by the end of the 1930s 12 000 000 people have been enabled to improve their housing standards and conditions under the fha program including new home purchases and the modernization and repair provisions of the national housing act the sixth annual report of the federal housing administration fha noted in 1939 11on the other hand the fha adopted rules that confirmed existing patterns of racial discrimination in lending and segregation in housing many black latinx and other non white americans neither benefited from its programs nor were eligible to receive its insured loans or move into neighborhoods that it helped subsidize 