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Myths and Facts about FHA

FHA's single family mortgage insurance program was created in 1934 to provide access to safe, affordable mortgage financing for American families. FHA does not lend money to homeowners. Instead, FHA insures qualified loans made by private lending institutions. Since 1934 FHA has made the dream of homeownership a reality for millions of American families.

During the economic recession and housing downturn, FHA was one of the only sources of mortgage finance available, and it has weathered the storm well. While banks, lending institutions and private mortgage insurers went bankrupt or collapsed, FHA persevered. During the worst economic crisis of our time, FHA provided access to homeownership for deserving first time homebuyers.

Today, FHA continues to provide insurance and pay claims. As the US economy continues to improve, and housing prices continue to rise, so will FHA's financial health. FHA has been the shining light in our economic crisis, and it will continue to be an integral force in the country’s economic recovery.

MYTH: FHA Is Bankrupt

FACT: FHA’s current economic value is $4.8 billion - a $6.1 billion increase from a year ago and $21 billion over the past two years.  FHA has approximately $40 billion in cash and reserves to pay claims.

MYTH: FHA Is Experiencing High Defaults And Foreclosures

FACT: FHA, like every other holder of mortgage risk, incurred financial losses as a result of foreclosures; however, an analysis of FHA data indicates the problem is concentrated in older FHA loans that were affected by the decline in house prices since 2006. There has been widespread improvement in the performance of FHA loans since the market collapsed in 2008. In just the past year, delinquency rates have improved by 14 percent and recovery rates have improved by 23 percent.

MYTH: FHA Is Not Serving Its Mission

FACT: FHA was created in 1934 during a difficult time in housing finance markets. It is now filling just the role it was designed for – to provide safe, affordable financing when the private market cannot or will not participate.  In 2014, FHA was used for 23 percent of all home purchase loans, 81 percent of which were for first-time homebuyers.  FHA plays a crucial role in supporting minority homeownership.  FHA accounted for 46.3 percent of home purchases by African American households and 47.9 percent of purchases by Hispanic households.

MYTH: FHA Borrowers Are Poor Risks

FACT: FHA borrowers in FY 2014 have an average credit score above 680.  FHA credit quality has improved steadily since 2007.  Over 40 percent of FHA loans made in every quarter since 2009 had credit scores above 680. In 2006 and 2007, only about 20% of the FHA loans insured in 2006-2007 had credit scores above 680.