What is the primary function of the Federal Housing Administration (FHA)?

• A. To regulate interest rates set by lenders
• B. To provide mortgage insurance on loans made by approved lenders
• C. To offer grants for first-time homebuyers
• D. To enforce consumer protection laws

Answer: (B)

The primary function of the Federal Housing Administration (FHA) is to provide mortgage insurance on loans made by approved lenders. This insurance protects lenders against losses that may occur if borrowers default on their loans, thereby encouraging lenders to offer mortgage loans to a broader range of borrowers, including those who might have lower credit scores or smaller down payments. By mitigating the risk for lenders, the FHA plays a vital role in promoting homeownership, especially among first-time buyers and those with limited financial resources.

This function is crucial in stabilizing the housing market and ensuring that more Americans have access to the opportunity for homeownership. It also helps in fostering a more accessible mortgage lending environment, as lenders are more willing to issue loans backed by FHA insurance.