The U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) offers a suite of mortgage insurance and loans for homeowners made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single-family and multi-family homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 47.5 million properties since its inception in 1934. FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner’s default. Loans must meet certain requirements established by FHA to qualify for insurance. While the insurance products listed below are no longer available, FHA Mortgage Insurance continues to play a major role in setting standards and ensuring stability in the housing finance industry:
Section 221(d)(3) - Below Market Rate Interest Program (BMIR): Authorized in the National Housing Act of 1961, the Section 221(D)(3) Below Market Interest Rate program (BMIR) allowed developers to obtain Federal Housing Administration (FHA) insured, three percent BMIR mortgages from private lenders, who then immediately sold the mortgages at face value to Fannie Mae. The program targeted middle-income households who could not qualify for public housing where rents were based on operating costs and mortgage amounts. Ended in 1968, the Section 221(D)(3) BMIR program was ultimately replaced by the Section 236 program.
Section 235 - Homeownership Program: Section 235 was an Federal Housing Administration (FHA) mortgage insurance program designed to help new borrowers achieve homeownership by allowing them to take out government-insured mortgages with no money down on new properties. On February 5, 1988, the Section 235 Program was terminated under section 401(d) of the Homes and Community Development Act of 1987.
Section 233(e) - Declining Urban Areas: The purpose of Section 223(e) is to permit the use of FHA mortgage insurance in older, declining urban areas where there is a need for affordable housing. A mortgage may be insured pursuant to Section 223(e) for the repair, rehabilitation, construction, or purchase of properties in older, declining urban areas.