What Is the FHA and What Is Its Role in the Housing Industry?

What Reverse Mortgage Borrowers Need to Know About the FHA

We have mentioned the FHA several times thus far in this guide. The reason for that is simple – the Federal Housing Administration (FHA) is the single largest insurer of reverse mortgages in the United States. This is the same organization that makes other home loans available, such as 203(b) and 203(k) loans for borrowers with little money for a down payment or less than perfect credit.

The FHA was established in 1934 with the stated goal of making it simpler for the average American to purchase a home of their own. The FHA is part of the federal government, but it is not funded with taxpayer dollars, making it the only such agency to be self-funded.

Originally a standalone agency, the FHA was eventually rolled into the Department of Housing and Urban Development (HUD), but it continues to fulfill its original mission. As of 2018, the FHA has insured over 48 million home loans (including reverse mortgages).

With that being said, the FHA is not a lender. The organization exists for the sole purpose of insuring mortgage loans, including reverse mortgages. What does that do for you, the borrower?

Simply put, the FHA guarantees that if you were to default on your loan, then the federal government would make good on it. This reduces the risk that lenders take when loaning money to borrowers, making it easier for even those without perfect credit to get a mortgage.

This applies to all types of FHA loans, not just HECM reverse mortgages. This includes 203(b) loans, 203(k) loans, GPM/GEM loans, and the rest of the organization’s extensive list of financial programs.

If you’d like to learn more, simply fill out the form below and a friendly reverse mortgage specialist will get in touch!