The primary difference between the Federal Housing Administration and the Department of Housing and Urban Development is the difference between an individual home owner and the broader community. The FHA works to ensure that persons desiring to become homeowners can find affordable housing and lenders willing to make mortgages. HUD takes a broader approach by working to build sustainable communities by strengthening the housing market and protecting consumers. The FHA is a part of HUD's efforts.
FHA History
The FHA was created during the Depression by the National Housing Act of 1934 in response to the collapsing housing market that followed the failed banking system. The FHA was formed to foster an adequate system of home financing by insuring mortgage loans as a means of stabilizing the mortgage market. The FHA became a part of HUD in 1965.
HUD History
HUD was created as a Cabinet-level agency in 1965 as part of President Lyndon Johnson's "Great Society" program. HUD's mission is to develop policies on housing and cities, and to execute those policies. HUD offers a variety of grants programs, as well as mortgage and lender insurance products to achieve its policy goals.
FHA vs. HUD Loan
An FHA or HUD loan is not a loan in the literal sense--that is, no money is borrowed from either the FHA or HUD to fund a mortgage as part of a home sale. HUD, through the FHA, provides mortgage insurance to buyers who might not otherwise qualify for a traditional home loan. By offering this insurance, lenders will make more mortgages to prospective homeowners, particularly low-income or first-time buyers. When the term FHA loan is used, what is really being referred to is a mortgage from a private lender that is insured by the FHA.
HUD Programs
Unlike FHA that focuses on single-family housing through its mortgage insurance program, HUD has a wide variety of programs that address broader housing concerns, such as community planning and development. These programs can be funded through grants or HUD's own mortgage insurance products for the development of multifamily housing and public housing. A list of the programs and how to participate are available on HUD's website.
FHA's Expanding Role
The sub-prime mortgage crisis resulted in bad mortgage situations for many individual homeowners, with no apparent relief. To address this crisis, Congress passed the Housing and Economic Recovery Act of 2008 which authorized the FHA to guarantee new loans to sub-prime borrowers if a lender agreed to write-down the mortgage balance to 90 percent of the home's appraised value. The law allows the FHA to guarantee up to $300 billion in new 30-year fixed-rate mortgages to replace the sub-prime loans.
Member Comments