Which government agency insures FHA loans?
Question & Answer
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Federal Reserve
The Federal Reserve is the central banking system of the United States responsible for monetary policy, regulating banks, and maintaining financial stability — it has no role in insuring individual mortgage loans or administering homeownership programs.
Federal Housing Administration
Fannie Mae
Fannie Mae (the Federal National Mortgage Association) is a government-sponsored enterprise that purchases and securitizes conventional mortgages on the secondary market, providing liquidity to lenders — it does not insure FHA loans or any individual mortgage loans.
Veterans Administration
The Veterans Administration (now the Department of Veterans Affairs, or VA) administers the VA loan guarantee program, which is a separate program exclusively for eligible veterans, active-duty service members, and surviving spouses — it has no involvement with FHA loan insurance.
Why is this correct?
The Federal Housing Administration (FHA), established as part of HUD (the U.S. Department of Housing and Urban Development), is the correct answer because it is the specific agency congressionally mandated to insure FHA loans under the National Housing Act of 1934. The FHA's insurance protects approved private lenders against losses from borrower default, which is the defining characteristic of the FHA loan program.
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