Editing Federal Housing Administration (section)

==History==
The Federal Housing Administration (FHA) was under the leadership of the Federal Housing Commissioner Raymond M. Foley from 1945 to 1947.<ref>{{cite web | url=https://www.trumanlibrary.gov/library/personal-papers/raymond-m-foley-papers | title=Foley, Raymond M. Papers &#124; Harry S. Truman }}</ref> and Franklin D. Richards from 1947-1952.<ref>{{cite web | url=https://www.trumanlibrary.gov/library/public-papers/173/statement-president-new-housing-and-home-finance-agency | title=Statement by the President on the New Housing and Home Finance Agency &#124; Harry S. Truman }}</ref> In 1954 Norman P. Mason was appointed as the Federal Housing Commissioner.<ref>https://www.eisenhowerlibrary.gov/sites/default/files/research/online-documents/presidential-appointment-books/1954/august-1954.pdf {{bare URL PDF|date=February 2024}}</ref>

=== New Deal origins ===
Amid the [[Great Depression]], a period marked by numerous [[National Mortgage Crisis of the 1930s|bank failures]], there was a substantial decline in both the availability of home loans and the rate of home ownership. During this era, the majority of home mortgages were characterized by short-term durations, typically spanning from three to five years. These mortgages lacked [[Amortization schedule|amortization features]] and often featured [[Balloon payment mortgage|balloon payment structures]]. Additionally, the [[loan-to-value]] (LTV) ratios for these mortgages generally remained below sixty percent.<ref>Monroe 2001, p.&nbsp;5</ref> This situation posed a significant obstacle for many working and middle-class families, rendering home ownership financially unattainable. During the banking crisis of the 1930s, all lenders were compelled to call in their outstanding mortgages, leaving no room for [[refinancing]]. Consequently, numerous borrowers, who were now unemployed and grappling with financial hardships, found themselves unable to meet their mortgage obligations. This unfortunate circumstance led to a substantial number of homes being foreclosed upon, which, in turn, precipitated a sharp decline in the housing market.

Banks, in the process of [[foreclosure]], acquired the collateral in the form of foreclosed homes. However, the depressed property values at that time meant that these assets had limited value. In response to these challenges, a comprehensive restructuring of the federal banking system took place in 1934. This overhaul culminated in the enactment of the [[National Housing Act of 1934]], which gave rise to the Federal Housing Administration (FHA). The FHA was established with the specific aim of regulating the interest rates and terms associated with insured mortgages.

Prior to the establishment of the FHA, the prevailing mortgage landscape featured predominantly balloon mortgages, which necessitated substantial lump-sum payments at the conclusion of relatively short mortgage terms, typically spanning 5 to 10 years. Moreover, prospective homebuyers were required to make substantial down payments, often ranging from 30% to 50% of the property's value. With the advent of FHA-insured loans, the down payment requirement was significantly reduced, with borrowers now only needing to provide as little as 10% down. Furthermore, the mortgage repayment period was extended, spanning from 20 to 30 years.

In 1934, following its establishment, the FHA enlisted the expertise of [[Homer Hoyt]] as Chief Land Economist. His role was pivotal in formulating the initial underwriting criteria for FHA-insured mortgages, a process that ultimately led to the development of the Redlining policy.<ref name=":32" />

==== Appraisal criteria and race discrimination ====
{{See also|Redlining}}

It is important to note that these innovative lending practices were, in some regions, exclusively available to white Americans. These practices effectively expanded the pool of white Americans who could manage both the initial [[down payment]] for a house and the ongoing monthly mortgage payments. Consequently, this expansion significantly enlarged the market for single-family homes.<ref>{{Cite book |last=Garvin |first=Alexander|author-link=Alexander Garvin|title=The American City: What Works, What Doesn't. 2nd Edition.|isbn=9780071373678|publisher=[[McGraw-Hill Professional]]|location=New York|year=2002}}</ref> The FHA employed a specific methodology for assessing the appraisal value of properties, relying on eight distinct criteria. It instructed its agents, known as "appraisers," to allocate more funding to projects with higher appraised values, up to a predetermined maximum limit. Among these criteria, the two most pivotal were "Relative Economic Stability," accounting for 40% of the appraisal value, and "protection from adverse influences," contributing an additional 20%.

In 1935, the FHA furnished its appraisers with an Underwriting Manual, which included the following directive: "If a neighborhood is to retain stability it is necessary that properties shall continue to be occupied by the same social and racial classes. A change in social or racial occupancy generally leads to instability and a reduction of values." Appraisers were further instructed to assign superior property and zoning ratings in areas deemed to have "protection against some adverse influences." The manual characterized these adverse influences as "infiltration by inharmonious racial or nationality groups."<ref>{{Cite journal |date=2019 |title=UNDER WRITING MANUAL UNDER WRITING AND VALUATION PROCEDURE UNDER TITLE II OF THE NATIONAL HOUSING ACT FEDERAL HOUSING ADMINISTRATION |url=https://www.huduser.gov/portal/sites/default/files/pdf/Federal-Housing-Administration-Underwriting-Manual.pdf |journal=Federal Housing Administration Under Writing Manual |volume=HA Form NO.2019 |pages=439}}</ref> Due to the FHA's appraisal criteria, which stipulated a whites-only occupancy requirement, racial segregation became an integral component of the federal mortgage insurance program. This occurred because the FHA often classified properties in racially mixed neighborhoods or those in close proximity to black neighborhoods as high-risk, effectively endorsing and enforcing racial segregation as an official requirement.<ref>{{Cite book |last=Rothstein |first=Richard |author-link=Richard Rothstein |title=[[The Color of Law: A Forgotten History of How Our Government Segregated America]] |isbn=9781631492860|publisher=[[Liverlight Publishing]] |location=New York |oclc=959808903|year = 2017|page=[https://books.google.com/books?id=SdtDDQAAQBAJ&pg=PT51 PT 51]}}</ref>

=== Fannie Mae and G.I. Bill ===
In 1938, Congress established the Federal National Mortgage Association, commonly known as [[Fannie Mae]]. This creation played a pivotal role in setting up a secondary mortgage market, enabling banks and investors to buy and sell existing home loans. Following the enactment of the Serviceman's Readjustment Act, popularly known as the [[G.I. Bill|GI Bill]], in 1944, the FHA orchestrated a system of long-term mortgages to facilitate the construction and sale of private homes.

Under the GI Bill, the [[United States Department of Veterans Affairs|Veteran's Administration]] introduced a home-loan guarantee program that allowed veterans to make a down payment of only one dollar, making homeownership more accessible to them. These transformative changes contributed significantly to a surge in American homeownership, with the percentage of families residing in owner-occupied homes increasing from 44% to 63% between 1934 and 1972.<ref name=":32">{{Cite web |last=Fritz |first=Marie Justine |date=October 4, 2016 |title=Federal Housing Administration (FHA) |url=https://www.britannica.com/topic/Federal-Housing-Administration |access-date=March 3, 2022 |website=britannica.com}}</ref>

=== Major housing projects ===
[[File:FHA photo.jpg|thumb|FHA project great depression]]

In 1935, [[Colonial Village (Arlington, Virginia)|Colonial Village]] in [[Arlington County, Virginia]], was the first large-scale, rental housing project erected in the United States that was Federal Housing Administration-insured.<ref name="VAnom">{{cite web |url=http://www.dhr.virginia.gov/registers/Counties/Arlington/000-0013_Colonial_Village_1980_Final_Nomination.pdf |title=National Register of Historic Places Inventory/Nomination: Monroe Courts Historic District |author=Virginia Historic Landmarks Commission Staff |date=May 1980}}</ref>  During World War&nbsp;II, the FHA financed a number of worker's housing projects including the [[Kensington Gardens Apartment Complex]] in [[Buffalo, New York]].<ref name="nrhp_app">{{cite web |url=https://drive.google.com/file/d/1NaZX-00pbKxsRZ_B8151LQKkgX2UJXoQ9XfS2fYVkTueIJkQi51EM_lkMB5C/view |title=National Register of Historic Places Registration: Kensington Gardens Apartment Complex |author1=Jason Wilson |author2=Tom Yots |date=June 2010 |access-date=December 22, 2010 |author3=Daniel McEneny}}</ref> During the Great Depression, Ohio Cities used federal government funds for building housing projects and first two of those projects completed in the United States were in Cincinnati and Cleveland.<ref name=":1">{{Cite web |title=Federal Housing Act |url=https://ohiohistorycentral.org/w/Federal_Housing_Act |access-date=March 3, 2022 |website=Ohio History Central}}</ref>

=== Establishment of HUD ===
In 1965, the Federal Housing Administration was integrated into the [[United States Department of Housing and Urban Development|Department of Housing and Urban Development]] following the enactment of the Department of Housing and Urban Development Act of 1965.<ref>{{Cite web |date=September 20, 2017 |title=HUD History |url=https://www.hud.gov/about/hud_history |access-date=May 2, 2022 |website=HUD.gov / U.S. Department of Housing and Urban Development (HUD) }}</ref> With the integration of the FHA into HUD, it transformed into a distinct entity within the larger HUD framework. Under this arrangement, the FHA would be overseen by a Federal Housing Commissioner who concurrently held the position of Assistant Secretary. This Commissioner would be responsible for both FHA-specific functions and the administration of other HUD programs related to the private mortgage market.

While the FHA and HUD share some commonalities, they also exhibit differences in their roles and responsibilities. The designated Commissioner would assume authority over all departmental programs pertaining to the private mortgage market, in addition to their dual roles as Assistant Secretary and head of the FHA.<ref>{{Cite web |title=CQ Almanac Online Edition |url=https://library.cqpress.com/cqalmanac/login.php?requested=%2Fcqalmanac%2Fdocument.php%3Fid%3Dcqal65-1259346 |access-date=May 5, 2022 |website=library.cqpress.com}}</ref>  The FHA and HUD both help borrowers with bad credit and insufficient down payment to be able to buy or repair a house.<ref>{{Cite web |last=Pirraglia |first=William |title=FHA vs HUD |url=https://homeguides.sfgate.com/fha-vs-hud-65024.html |access-date=May 5, 2022 |website=homeguides.sfgate.com|date=February 20, 2013 }}</ref>