Federal Housing Administration

Definition

The Federal Housing Administration (FHA) is a government agency created in 1934 to help make home ownership more accessible and affordable for Americans. It provides mortgage insurance to approved lenders, protecting them from losses if borrowers default on their loans.

5 Must Know Facts For Your Next Test

1. The FHA was created as part of the National Housing Act of 1934, which was a key component of President Franklin D. Roosevelt's New Deal programs.
2. The FHA's mortgage insurance program made it easier for Americans, especially those with lower incomes, to obtain home loans by reducing the risk for lenders.
3. The FHA played a significant role in the suburbanization of America by insuring mortgages for new homes in the growing suburbs, often excluding minority communities through the practice of redlining.
4. The FHA's policies and practices contributed to the racial segregation of neighborhoods and the concentration of wealth in white communities, exacerbating existing inequalities.
5. The FHA's mortgage insurance program helped spur a boom in homeownership in the United States, leading to a significant increase in the nation's homeownership rate during the mid-20th century.

Review Questions

• Explain how the Federal Housing Administration (FHA) helped make home ownership more accessible during the Great Depression.
  • The FHA was created in 1934 as part of President Franklin D. Roosevelt's New Deal programs to help address the housing crisis during the Great Depression. By providing mortgage insurance to approved lenders, the FHA reduced the risk for these lenders, making it easier for Americans, especially those with lower incomes, to obtain home loans. This helped spur a boom in homeownership in the United States, leading to a significant increase in the nation's homeownership rate during the mid-20th century.
• Describe how the FHA's policies and practices contributed to the racial segregation of neighborhoods and the concentration of wealth in white communities.
  • The FHA's mortgage insurance program often excluded minority communities through the discriminatory practice of redlining, which denied or limited financial services to certain neighborhoods based on their racial or ethnic composition. This helped facilitate the suburbanization of America, as the FHA insured mortgages for new homes in the growing suburbs, primarily benefiting white families. These policies and practices contributed to the racial segregation of neighborhoods and the concentration of wealth in white communities, exacerbating existing inequalities.
• Evaluate the long-term impact of the FHA's role in shaping the development of American suburbs and homeownership patterns.
  • The FHA's mortgage insurance program played a significant role in the suburbanization of America and the expansion of homeownership, particularly among white families. While the FHA helped make home ownership more accessible for many Americans, its discriminatory practices, such as redlining, contributed to the racial segregation of neighborhoods and the concentration of wealth in white communities. This had long-lasting consequences, as the wealth and opportunity gaps between white and minority communities continued to grow, perpetuating existing inequalities. The FHA's impact on the development of American suburbs and homeownership patterns highlights the complex legacy of government policies and their role in shaping the social and economic landscape of the country.

Related terms

Mortgage Insurance: A type of insurance that protects lenders from losses if a borrower defaults on their mortgage. The FHA provides this insurance to approved lenders.

Redlining: The discriminatory practice of denying or limiting financial services, such as mortgages, to certain neighborhoods based on their racial or ethnic composition.

New Deal: A series of economic programs and reforms implemented by President Franklin D. Roosevelt in the 1930s to help the United States recover from the Great Depression, including the creation of the FHA.