Which of the following best describes the role of the FHA in mortgage lending?
Correct Answer
B) The FHA insures mortgage loans made by approved private lenders
The Federal Housing Administration (FHA) does not make loans directly to borrowers. Instead, it insures mortgage loans originated by FHA-approved private lenders, protecting lenders against borrower default. This insurance allows lenders to offer loans with lower down payments and more flexible qualifying standards. FHA loans are not limited to veterans — VA loans serve that purpose.
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Related Topics & Key Terms
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Related Concepts
TILA is a federal law that requires lenders to disclose the true cost of credit to borrowers, including the annual percentage rate (APR), total finance charges, and loan terms. It is implemented by Regulation Z.
A trustee sale is a type of foreclosure where a trustee, appointed under a deed of trust, sells the property at auction to satisfy the debt.
Usury is the practice of charging an interest rate that exceeds the maximum rate permitted by state law. Usury laws protect borrowers from excessive interest charges on loans.
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