What is the primary function of the FHA?

What is the primary function of the FHA?

• A. Provide housing for low-income families
• B. Insure loans to reduce lender risk
• C. Offer grants for first-time homebuyers
• D. Regulate mortgage interest rates

Answer: (B)

The Federal Housing Administration (FHA) primarily functions to insure loans made by approved lenders to borrowers, particularly those with lower income or less-than-perfect credit. This insurance reduces the lender's risk, as the FHA promises to repay a portion of the loan if the borrower defaults. By providing this safety net for lenders, the FHA encourages them to extend credit to a broader range of homebuyers, thereby increasing access to home ownership. In the context of the other options, while the FHA does indirectly support low-income families by facilitating their access to loans, it does not directly provide housing or offer grants. Additionally, the FHA is not responsible for regulating mortgage interest rates; those rates are influenced by broader economic factors and market conditions. Therefore, the primary role of the FHA centers around insuring loans, making option B the correct choice.

The Federal Housing Administration (FHA) primarily functions to insure loans made by approved lenders to borrowers, particularly those with lower income or less-than-perfect credit. This insurance reduces the lender's risk, as the FHA promises to repay a portion of the loan if the borrower defaults. By providing this safety net for lenders, the FHA encourages them to extend credit to a broader range of homebuyers, thereby increasing access to home ownership.

In the context of the other options, while the FHA does indirectly support low-income families by facilitating their access to loans, it does not directly provide housing or offer grants. Additionally, the FHA is not responsible for regulating mortgage interest rates; those rates are influenced by broader economic factors and market conditions. Therefore, the primary role of the FHA centers around insuring loans, making option B the correct choice.