FHA-Insured Home Loans: An Overview

October 7, 2008 – January 21, 2022 RS20530

FHA-Insured Home Loans: An Overview
Updated January 21, 2022
Congressional Research Service
https://crsreports.congress.gov
RS20530

FHA-Insured Home Loans: An Overview

Summary
The Federal Housing Administration (FHA), an agency of the Department of Housing and Urban
Development (HUD), was created by the National Housing Act of 1934. FHA insures private
lenders against the possibility of borrowers defaulting on mortgages that meet certain criteria. If
the borrower defaults on the mortgage, FHA is to repay the lender the remaining amount owed.
FHA insurance can increase the willingness of private lenders to offer mortgages to some
borrowers who might otherwise have difficulty obtaining affordable mortgages, such as
borrowers with low down payments. In FY2021, FHA insured about 1.4 million new mortgages
(including both home purchase and refinance mortgages) with a combined principal balance of
$343 billion.
A borrower that obtains an FHA-insured mortgage must meet FHA’s eligibility and underwriting
standards, including showing sufficient income to repay a mortgage. FHA requires a minimum
down payment of 3.5% from most borrowers, which is lower than the down payment required for
many other types of mortgages. Borrowers are charged fees, called mortgage insurance
premiums, in exchange for the insurance.
FHA-insured mortgages cannot exceed a statutory maximum mortgage amount, which varies by
area. The maximum mortgage amount for a given area is based on area median house prices, but
cannot be lower than a specified floor or higher than a specified ceiling. For calendar year 2022,
FHA can insure mortgages up to $420,680 in all areas of the country. In higher-cost areas, the
loan limits are set at higher amounts, up to a ceiling of $970,800.
FHA insures single-family mortgages through its Mutual Mortgage Insurance Fund (MMI Fund).
Money flows into the MMI Fund primarily from the mortgage insurance premiums paid by
borrowers, and money flows out of the MMI Fund primarily to pay claims on defaulted
mortgages. Premiums and other revenue are intended to be sufficient to pay for insurance claims
and other costs of insured mortgages. Policy decisions related to FHA-insured mortgages often
involve tradeoffs between FHA’s mission of expanding credit access to underserved borrowers
and safeguarding the financial soundness of the MMI Fund.
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Contacts
Author Information ........................................................................................................................ 19
Acknowledgments ......................................................................................................................... 19

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FHA-Insured Home Loans: An Overview

Introduction
The Federal Housing Administration (FHA) is an agency of the Department of Housing and
Urban Development (HUD) that insures private mortgage lenders against the possibility of
borrowers defaulting on certain mortgage loans.1 If a mortgage borrower defaults on a
mortgage—that is, does not repay the mortgage as promised—FHA is to pay the lender the
remaining amount that the borrower owes. FHA insurance protects the lender, rather than the
borrower, in the event of borrower default; a borrower who defaults on an FHA-insured mortgage
will still experience the consequences of foreclosure. To be eligible for FHA insurance, the
mortgage must be originated by a lender that has been approved by FHA, and the mortgage and
the borrower must meet certain criteria.
FHA is one of three government agencies that provide insurance or guarantees on certain home
mortgages made by private lenders, along with the Department of Veterans Affairs (VA) and the
United States Department of Agriculture (USDA).2 Of these federal mortgage insurance
programs, FHA is the most broadly targeted. Unlike VA- and USDA-insured mortgages, the
availability of FHA-insured mortgages is not limited by factors such as veteran status, income, or
whether the property is located in a rural area. However, the availability or attractiveness of FHA-
insured mortgages may be limited by other factors, such as the maximum mortgage amount that
FHA will insure, the fees that it charges for insurance, and its eligibility standards.
This report provides background on FHA’s history and market role and an overview of the basic
eligibility and underwriting criteria for FHA-insured home loans. It also provides data on the
number and dollar volume of mortgages that FHA insures, along with data on FHA’s market
share in recent years. It does not go into detail on the financial status of the FHA mortgage
insurance fund. For information on FHA’s financial position, see CRS Report R42875, FHA
Single-Family Mortgage Insurance: Financial Status of the Mutual Mortgage Insurance Fund
(MMI Fund).
Background
History
The Federal Housing Administration was created by the National Housing Act of 1934,3 during
the Great Depression, to encourage lending for housing and to stimulate the construction
industry.4 Prior to the creation of FHA, few mortgages exceeded 50% of the property’s value and
most mortgages were written for terms of five years or less. Furthermore, mortgages were

1 This report addresses FHA’s program for insuring mortgages on single-family homes, which is by far the largest FHA
program. (Single-family homes are defined as properties with one to four dwelling units.) However, FHA is also
authorized to insure mortgages on a variety of other types of properties, including multifamily buildings and hospitals
and other health care facilities. These FHA programs are not discussed in this report.
2 VA provides guarantees on certain home mortgages made to veterans, and USDA guarantees certain home mortgages
made to lower-income households in rural areas. For more information on VA- and USDA-guaranteed mortgages, see
CRS Report R42504, VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants and CRS
Report RL31837, An Overview of USDA Rural Development Programs.
3 The National Housing Act of 1934 is P.L. 73-479, and is codified at 12 U.S.C. §1701 et seq.
4 For more information on the historical role of FHA, see the U.S. Department of Housing and Urban Development’s
Office of Policy Development and Research Housing Finance Working Paper Series, The FHA Single-Family
Insurance Program: Performing a Needed Role in the Housing Finance Market, Working Paper No. HF-019,
December 2012, https://www.huduser.gov/portal//publications/pdf/FHA_SingleFamilyIns.pdf.
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FHA-Insured Home Loans: An Overview

typically not structured to be fully repaid by the end of the loan term; rather, at the end of the
five-year term, the remaining loan balance had to be paid in a lump sum or the mortgage had to
be renegotiated. During the Great Depression, lenders were unable or unwilling to refinance
many of the loans that became due. Thus, many borrowers lost their homes through foreclosure,
and lenders lost money because property values were falling. Lenders became wary of the
mortgage market.
FHA institutionalized a new idea: 20-year mortgages on which the loan would be completely
repaid at the end of the loan term. If borrowers defaulted, FHA insured that the lender would be
fully repaid. By standardizing mortgage instruments and setting certain standards for mortgages,
the creation of FHA was meant to instill confidence in the mortgage market and, in turn, help to
stimulate investment in housing and the overall economy. Eventually, lenders began to make
long-term mortgages without FHA insurance if borrowers made significant down payments. Over
time, 15- and 30-year mortgages have become standard mortgage products.
When the Department of Housing and Urban Development (HUD) was created in 1965, FHA
became part of HUD. Today, FHA is intended to facilitate access to affordable mortgages for
some households who otherwise might not be well-served by the private market. Furthermore, it
facilitates access to mortgages during economic or mortgage market downturns by continuing to
insure mortgages when the availability of mortgage credit has otherwise tightened. For this
reason, it is said to play a “countercyclical” role in the mortgage market—that is, it tends to
insure more mortgages when the mortgage market or overall economy is weak, and fewer
mortgages when the economy is strong and other types of mortgages are more readily available.
Current Role
Facilitating Access to Mortgage Credit
Some prospective homebuyers may have the income to sustain monthly mortgage payments, but
due to smaller down payments, weaker credit histories, or other factors might find it difficult to
obtain a mortgage at an affordable interest rate or to qualify for a mortgage at all. FHA mortgage
insurance is intended to make lenders more willing to offer affordable mortgages to such
borrowers by insuring the lender against the possibility of borrower default.
FHA-insured loans have lower down payment requirements than most conventional mortgages.
(Conventional mortgages are mortgages that are not insured by FHA or guaranteed by another
government agency, such as VA or USDA.5) Because saving for a down payment is often the
biggest barrier to homeownership for first-time homebuyers and lower- or moderate-income
homebuyers, the smaller down payment requirement for FHA-insured loans may allow some
households to obtain a mortgage earlier than they otherwise could. (Borrowers with down
payments of less than 20% could also obtain non-FHA mortgages with private mortgage
insurance. See the nearby text box on “FHA and Private Mortgage Insurance.”) FHA-insured
mortgages also have less stringent requirements related to credit history than many conventional
loans. This might make FHA-insured mortgages attractive to borrowers without traditional credit
histories or with weaker credit histories, who would either find it difficult to take out a mortgage
absent FHA insurance or may find it more expensive to do so.

5 Conventional mortgages include mortgages that are purchased by the government-sponsored enterprises (GSEs)
Fannie Mae and Freddie Mac. Although technically not government agencies, Fannie Mae and Freddie Mac are
currently under government conservatorship and have received government financial assistance. Mortgages that meet
Fannie Mae’s and Freddie Mac’s criteria are referred to as conforming mortgages.
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FHA-Insured Home Loans: An Overview

FHA-insured mortgages play a particularly large role for first-time homebuyers, low- and
moderate-income households, and minorities. For example, nearly 85% of FHA-insured
mortgages made to purchase a home (rather than to refinance an existing mortgage) in FY2021
were obtained by first-time homebuyers, while about one-third of all FHA loans (both purchase
and refinance loans) were obtained by minority borrowers.7
Since many FHA-insured mortgages are made
to borrowers who might otherwise have
FHA and Private Mortgage Insurance
difficulty qualifying for affordable mortgages,
Another option for borrowers with small down
FHA borrowers often have somewhat lower
payments might be to obtain mortgage insurance
credit scores, higher debt-to-income ratios, and
from a private company, rather than from a
government agency like FHA. This is known as private
lower down payments (leading to higher loan-
mortgage insurance (PMI). Conventional mortgages
to-value ratios).8 These factors can increase
with down payments of less than 20% are generally
mortgage risk. However, FHA-insured
required to carry PMI.6 Therefore, borrowers with a
mortgages must meet FHA’s underwriting
down payment of less than 20% may find themselves
criteria and are prohibited from carrying riskier
choosing between a conventional mortgage with PMI
or an FHA-insured mortgage.
features such as negative amortization.9 (FHA-
Whether PMI or FHA insurance is a more attractive
insured mortgages can have adjustable interest
option for a specific borrower wil depend on a
rates, subject to certain conditions.) The
number of factors, including the borrower’s
tradeoff between increasing mortgage access
circumstances, the respective underwriting standards,
and limiting the risk of mortgages defaulting—
and the fees charged by FHA and PMI companies at a
a negative outcome for both the borrower and
given point in time, which can be affected by
economic conditions and the features of the
FHA—affects many policy decisions related to
mortgage itself.
FHA-insured mortgages.
Countercyclical Role
Traditionally, FHA plays a countercyclical role in the mortgage market, meaning that it tends to
insure more mortgages when mortgage credit markets are tight and fewer mortgages when
mortgage credit is more widely available. A major reason for this is that FHA continues to insure
mortgages that meet its standards even during market downturns or in regions experiencing

6 This is largely due to the requirements of Fannie Mae and Freddie Mac, which influence a large part of the mortgage
market. By statute, Fannie Mae and Freddie Mac cannot purchase mortgages where the mortgage amount exceeds 80%
of the value of the home unless the mortgage includes some kind of credit enhancement, such as private mortgage
insurance. Fannie Mae and Freddie Mac currently accept certain mortgages with down payments as low as 3% with
private mortgage insurance, subject to certain conditions. See Fannie Mae’s HomeReady Mortgage at
https://singlefamily.fanniemae.com/originating-underwriting/mortgage-products/homeready-mortgage, and Freddie
Mac’s Home Possible Mortgage at https://sf.freddiemac.com/working-with-us/origination-underwriting/mortgage-
products/home-possible.
7 U.S. Department of Housing and Urban Development, FHA Annual Management Report Fiscal Year 2021, p. 15,
https://www.hud.gov/sites/dfiles/Housing/documents/FHAFY2021ANNUALMGMNTRPT.pdf. These figures are for
FHA-insured forward mortgages and do not include FHA-insured reverse mortgages, known as Home Equity
Conversion Mortgages (HECMs).
8 In FY2021, FHA reported that the average loan-to-value ratio for FHA purchase mortgages was 95.54%, the average
debt-to-income ratio for FHA purchase mortgages was about 43%, and the average borrower credit score for all FHA-
insured mortgages was 672. See HUD, Annual Report to Congress Regarding the Financial Status of the FHA Mutual
Mortgage Insurance Fund, Fiscal Year 2021, pp. 27-30, https://www.hud.gov/sites/dfiles/Housing/documents/
2021FHAAnnualReportMMIFund.pdf.
9 With a negative amortization loan, borrowers have the option to pay less than the full amount of the interest due for a
set period of time. The loan negatively amortizes as the remaining interest is added to the outstanding loan balance, so
that the loan balance increases over time rather than decreasing as it would with positive amortization.
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economic turmoil. When the economy is weak and lenders and private mortgage insurers tighten
credit standards and reduce lending activity, FHA-insured mortgages may be the only mortgages
available to some borrowers, or may have more favorable terms than mortgages that lenders are
willing to make without FHA insurance. When the economy is strong and mortgage credit is more
widely available, many borrowers may find it easier to qualify for affordable conventional
mortgages.
Features of FHA-Insured Mortgages
This section briefly describes some of the major features of FHA-insured mortgages for
purchasing or refinancing a single-family home.10 Single-family homes are defined as properties
with one to four separate dwelling units.11
Eligibility and Underwriting Guidelines
FHA-insured loans are available to borrowers who intend to be owner-occupants and who can
demonstrate the ability to repay the loan according to the terms of the contract. FHA-insured
loans must be underwritten in accordance with accepted practices of prudent lending institutions
and FHA requirements. Lenders must examine factors such as the applicant’s credit, financial
status, monthly shelter expenses, funds required for closing expenses, effective monthly income,
and debts and obligations. In general, individuals who have previously been subject to a mortgage
foreclosure are not eligible for FHA-insured loans for at least three years after the foreclosure.12
As a general rule, the applicant’s prospective mortgage payment should not exceed 31% of gross
effective monthly income. The applicant’s total debt obligations, including the proposed housing
expenses, should not exceed 43% of gross effective monthly income. If these ratios are not met,
the borrower may be able to present the presence of certain compensating factors, such as cash
reserves, in order to qualify for an FHA-insured loan.13
Since October 4, 2010, FHA has required a minimum credit score of 500, and has required higher
down payments from borrowers with credit scores below 580 than from borrowers with credit
scores above that threshold.14 See the “Down Payment” section for more information on down
payment requirements for FHA-insured loans.

10 Detailed information on FHA’s underwriting and eligibility requirements can be found in HUD Handbook 4000.1,
FHA Single Family Housing Policy Handbook, available at http://portal.hud.gov/hudportal/HUD?src=/
program_offices/administration/hudclips/handbooks/hsgh. The discussion in this section applies to FHA-insured
forward mortgages and does not include FHA-insured reverse mortgages. For more information on FHA-insured
reverse mortgages, see CRS Report R44128, HUD’s Reverse Mortgage Insurance Program: Home Equity Conversion
Mortgages.
11 For example, a duplex would be considered a single-family property under this definition. A borrower could obtain
an FHA-insured mortgage to purchase a duplex, live in one unit, and rent out the second unit. The borrower must
intend to occupy one of the units as his or her primary residence.
12 See HUD Handbook 4000.1, Sections II.A.4.b.iii(H) and II.A.5.a.iii(I). Exceptions can be made if the foreclosure
was due to certain extenuating circumstances, such as a serious medical condition, if the borrower has re-established a
good credit record.
13 See HUD Handbook 4000.1, Section II.A.5.d.viii for compensating factors acceptable to FHA.
14 U.S. Department of Housing and Urban Development, Mortgagee Letter 2010-29, “Minimum Credit Scores and
Loan-to-Value Ratios,” September 3, 2010, https://www.hud.gov/sites/documents/10-29ML.PDF. Few FHA-insured
mortgages are made to borrowers with credit scores below 580. For more information on the distribution of borrower
credit scores for FHA-insured mortgages, see HUD, Fiscal Year 2021 Annual Report to Congress on the Financial
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Owner Occupancy
In general, borrowers must intend to occupy the property as a principal residence.15
Eligible Loan Purposes
FHA-insured loans may be used to purchase one-family detached homes, townhomes, rowhouses,
two- to four-unit buildings, manufactured homes, and condominiums.16 FHA-insured loans may
also be obtained to build a home; to repair, alter, or improve a home; to refinance an existing
home loan; to simultaneously purchase and improve a home; or to make certain energy efficiency
or weatherization improvements in conjunction with a home purchase or mortgage refinance.17
Different or additional requirements may apply for certain property types or loan purposes.18
Loan Term
FHA-insured mortgages may be obtained with loan terms of up to 30 years.19
Interest Rates
The interest rate on an FHA-insured loan is negotiated between the borrower and lender. The
borrower has the option of selecting a loan with an interest rate that is fixed for the life of the loan
or one on which the rate may be adjusted annually.
Down Payment
FHA requires a lower down payment than many other types of mortgages. Under changes made
by the Housing and Economic Recovery Act of 2008 (HERA, P.L. 110-289), borrowers are
required to contribute at least 3.5% in cash or its equivalent to the cost of acquiring a property
with an FHA-insured mortgage. (Prior law had required borrowers to contribute at least 3% in
cash or its equivalent.) Prohibited sources of the required funds include the home seller, any
entity that financially benefits from the transaction, and any third party that is directly or
indirectly reimbursed by the seller or by anyone that would financially benefit from the
transaction.20 HUD has interpreted the 3.5% cash contribution as a down payment requirement
and has specified that contributions toward closing costs cannot be counted toward it.21

Status of the FHA Mutual Mortgage Insurance Fund, p. 29, https://www.hud.gov/sites/dfiles/Housing/documents/
2021FHAAnnualReportMMIFund.pdf.
15 In certain limited circumstances, FHA will insure mortgages used to purchase secondary residences. A secondary
residence cannot be a vacation home. Furthermore, in some cases owner-occupants or investors may be able to obtain
FHA-insured loans in order to purchase property that has been acquired by FHA as a result of foreclosure. See HUD
Handbook 4000.1, Section II.A.1.b.iii and Section II.A.8.o.v.
16 See HUD Handbook 4000.1, Section II.A.1.b.iv(B).
17 See HUD Handbook 4000.1, Section II.A.1.b.i and Section II.A.8.
18 Particular requirements that apply to certain types of FHA loans, such as loans for manufactured housing or
condominiums, are described in the relevant sections of HUD Handbook 4000.1, regulations, and FHA Mortgagee
Letters. Mortgagee Letters are available at https://www.hud.gov/program_offices/administration/hudclips/letters/
mortgagee.
19 See HUD Handbook 4000.1, Section II.A.2.d.
20 12 U.S.C. §1709(b)(9)
21 U.S. Department of Housing and Urban Development, Mortgagee Letter 2008-23, “Revised Downpayment and
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Since October 4, 2010, FHA has required a 10% down payment from borrowers with credit
scores between 500 and 579, while borrowers with credit scores of 580 or above are still required
to make a down payment of at least 3.5%. FHA no longer insures loans made to borrowers with
credit scores below 500.22
Maximum Mortgage Amount
There is no income limit for borrowers seeking FHA-insured loans. However, FHA-insured
mortgages cannot exceed a maximum mortgage amount set by law.23 The maximum mortgage
amounts allowed for FHA-insured loans vary by area, based on a percentage of area median home
prices.24 Different limits are in effect for one-unit, two-unit, three-unit, and four-unit properties.
The limits are subject to a statutory floor and ceiling; that is, the maximum mortgage amount that
FHA will insure in a given area cannot be lower than the floor, nor can it be higher than the
ceiling.
In 2008, Congress temporarily increased the maximum mortgage amounts in response to turmoil
in the housing and mortgage markets, with the intention of allowing more households to qualify
for FHA-insured mortgages during a period of tighter credit availability.25 New permanent
maximum mortgage amounts were later established by the Housing and Economic Recovery Act
of 2008. The maximum mortgage amounts established by HERA were higher than the previous
permanent limits, but in many cases lower than the temporarily increased limits. However, the
higher temporary limits were extended for several years, until they expired at the end of calendar
year 2013.26
Since January 1, 2014, the maximum mortgage amounts have been set at the permanent HERA
levels. For a one-unit home, HERA established the maximum mortgage amounts at 115% of area
median home prices, with a floor set at 65% of the Freddie Mac conforming loan limit and a
ceiling set at 150% of the Freddie Mac conforming loan limit. For calendar year 2022, the floor is

Maximum Mortgage Requirements,” September 5, 2008, https://www.hud.gov/sites/documents/DOC_19737.PDF.
22 U.S. Department of Housing and Urban Development, Mortgagee Letter 2010-29, “Minimum Credit Scores and
Loan-to-Value Ratios,” September 3, 2010, https://www.hud.gov/sites/documents/10-29ML.PDF.
23 The FHA maximum mortgage amounts are codified at 12 U.S.C. §1709(b)(2). The statute allows for special higher
limits for Alaska, Hawaii, Guam, and the Virgin Islands (see 12 U.S.C. §1715d). To look up the maximum mortgage
amount for a specific area, see HUD’s website at https://entp.hud.gov/idapp/html/hicostlook.cfm.
24 FHA calculates area-by-area limits each year based on the prior year’s area median home price data, so the actual
dollar amount of the limit in a given area can change from year to year. The maximum mortgage amounts are set on a
county basis, except that in metropolitan statistical areas (MSAs) the maximum mortgage amount for the entire MSA is
based on the county within the MSA that has the highest median home price.
25 In early 2008, Congress enacted the Economic Stimulus Act of 2008 (ESA, P.L. 110-185), which temporarily
increased the maximum mortgage amounts for a one-unit home to 125% of area median home prices, with a floor of
$271,050 and a high-cost area ceiling of $729,750. Immediately prior to the enactment of ESA, the limits had been set
at 95% of area median house prices, with a floor of $200,160 and a ceiling of $362,790. See U.S. Department of
Housing and Urban Development, Mortgagee Letter 2008-02, “2008 FHA Maximum Mortgage Limits,” January 18,
2008, http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/letters/mortgagee/inactive.
26 The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) amended the maximum mortgage
amounts for calendar year 2009, setting them at the higher of (1) the 2008 limits set by ESA, or (2) the original 2009
limits set by HERA. Under ARRA, the floor was $271,050, the high-cost area limit was $729,750, and the limit in all
other areas was the higher of 125% of 2007 area median home prices (the ESA limit) or 115% of more current area
median home prices (the HERA limit). (The percentage of the Freddie Mac conforming loan limit used to calculate the
loan limit floor was the same under both ESA and HERA.) The ARRA limits were extended several times until they
expired at the end of 2013.
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$420,680 and the ceiling is $970,800.27 (That is, FHA will insure mortgages with principal
balances up to $420,680 in all areas of the country. In higher-cost areas, it will insure mortgages
with principal balances up to 115% of the area median home price, up to a cap of $970,800 in the
highest-cost areas.28) These maximum mortgage amounts are shown in Table 1. Higher limits
apply to two- to four-unit homes.29
Table 1. FHA Maximum Mortgage Amounts
Maximum
Maximum
Mortgage
Mortgage
Property
Amount
Maximum Mortgage Amount in Areas Between the
Amount
Size
Floora
Floor and the Ceiling
Ceilingb
1-unit
$420,680
115% of area median home prices for a one-unit property
$970,800
Source: 12 U.S.C. §1709(b)(2) and FHA Mortgagee Letter 2021-28.
Notes: Actual mortgage limits in specific areas can be found at https://entp.hud.gov/idapp/html/hicostlook.cfm.
a. This is the maximum mortgage amount in areas where 115% of area median home prices is lower than 65%
of the Freddie Mac limit.
b. This is the maximum mortgage amount in areas where 115% of area median home prices is equal to or
higher than 150% of the Freddie Mac limit. The National Housing Act provides that FHA may adjust the
mortgage limits for loans in Alaska, Hawaii, Guam, and the Virgin Islands to up to 150% of the ceiling.
Mortgage Insurance Fees (Premiums)
Borrowers of FHA-insured loans pay an up-front mortgage insurance premium (MIP) and annual
mortgage insurance premiums in exchange for FHA insurance. These premiums are set as a
percentage of the loan amount. The maximum amounts that FHA is allowed to charge for the
annual and the up-front premiums are set in statute. However, since these are maximum amounts,
HUD has the discretion to set the premiums at lower levels.
Up-Front Mortgage Insurance Premiums30
The maximum up-front premium that FHA may charge is 3% of the mortgage amount, or 2.75%
of the mortgage amount for a first-time homebuyer who has received homeownership

27 FHA Mortgagee Letter 2021-28, November 30, 2021, https://www.hud.gov/sites/dfiles/OCHCO/documents/2021-
28mlhsg.pdf. The statutory ceilings and floors are set as a percentage of the conforming loan limit, which is the dollar
limit on the size of mortgages that can be purchased by Fannie Mae and Freddie Mac. The floor and ceiling can change
if Congress changes the percentages of the conforming loan limit that constitute the ceiling and the floor, or if the
conforming loan limit itself changes. HERA established the conforming loan limit at $417,000, but directed the Federal
Housing Finance Agency, the regulator and conservator for Fannie Mae and Freddie Mac, to adjust the conforming
loan limit each year to account for home price increases, subject to certain restrictions. (See 12 U.S.C. §1717(b)(2) and
12 U.S.C. §1454(a)(2).) The conforming loan limit for 2022 is set at $647,200, so the FHA loan limit floor is $420,680
(65% of $647,200), and the ceiling is $970,800 (150% of $647,200).
28 Lists of the counties that have FHA loan limits that are higher than the statutory floor in 2022 (that is, loan limits set
as the ceiling, or in between the floor and the ceiling) are available at https://www.hud.gov/program_offices/housing/
sfh/lender/origination/mortgage_limits.
29 The maximum mortgage amounts for two- to four-unit homes in a given area are calculated based on specified
multiples of the loan limit for one-unit homes, subject to a national floor and ceiling. For 2022, for two-unit homes, the
maximum mortgage amount floor is $538,650 and the ceiling is $1,243,050; for three-unit homes, the floor is $651,050
and the ceiling is $1,502,475; and for four-unit homes, the floor is $809,150 and the ceiling is $1,867,275. See 12
U.S.C. §1709(b)(2)(A), FHA Mortgagee Letter 2021-28, and https://entp.hud.gov/idapp/html/hicostlook.cfm.
30 In the past, if borrowers prepaid their loans, they may have been due refunds of part of the up-front insurance
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counseling.31 Currently, FHA is charging the same up-front premiums to first-time homebuyers
who receive homeownership counseling and all other borrowers.
Since April 9, 2012, HUD has set the up-front premium at 1.75% of the loan amount, whether or
not the borrower is a first-time homebuyer who received homeownership counseling.32 This
premium applies to most single-family mortgages.33
Annual Mortgage Insurance Premiums
The amount of the maximum annual premium varies based on the loan’s initial loan-to-value
ratio. For most loans, (1) if the loan-to-value ratio is above 95%, the maximum annual premium
is 1.55% of the loan balance, and (2) if the loan-to-value ratio is 95% or below, the maximum
annual premium is 1.5% of the loan balance.34
Beginning in 2010, in response to rising mortgage defaults and foreclosures as a result of the
housing market turmoil at the time, FHA increased the actual annual premiums that it charges
several times in order to bring more money into the FHA insurance fund and ensure that it had
sufficient funds to pay for defaulted loans.35 However, in January 2015, FHA announced a
decrease in the annual premium for most single-family loans. For most FHA case numbers
assigned on or after January 26, 2015, the annual premiums are 0.85% of the outstanding loan
balance if the initial loan-to-value ratio is above 95% and 0.80% of the outstanding loan balance
if the initial loan-to-value ratio is 95% or below.36 This is a decrease from 1.35% and 1.30%,
respectively, which is what FHA had been charging from April 1, 2013, until January 26, 2015.37

premium that was not earned by FHA. The refund amount depended on when the mortgage closed and declined as the
loan matured. The Consolidated Appropriations Act 2005 (P.L. 108-447) amended the National Housing Act to provide
that, for mortgages insured on or after December 8, 2004, borrowers are not eligible for refunds of up-front mortgage
insurance premiums. The one exception is when borrowers refinance an existing FHA-insured mortgage with a new
FHA-insured mortgage within three years: such borrowers are eligible for a refund credit that reduces the up-front
mortgage insurance premium on the refinanced mortgage. For more information, see FHA Mortgagee Letter 05-03,
“Elimination of Refunds of Upfront Mortgage Insurance Premiums,” January 6, 2005, available at
https://www.hud.gov/program_offices/administration/hudclips/sfhsuperseded/mltrs_full#2005 and HUD Handbook
4000.1, Sections II.A.2.e.i(B) and II.A.8.d.iv.
31 12 U.S.C. §1709(c)(2)(A). In 2008, HERA increased the maximum up-front mortgage insurance premiums that FHA
is permitted to charge to the current levels.
32 U.S. Department of Housing and Urban Development, Mortgagee Letter 12-4, “Single Family Mortgage Insurance:
Annual and Up-Front Mortgage Insurance Premiums–Changes,” March 6, 2012, http://portal.hud.gov/hudportal/
documents/huddoc?id=12-04ml.pdf.
33 Different premiums apply to certain FHA programs, including Title I loans and Home Equity Conversion Mortgages
(HECMs).
34 12 U.S.C. §1709(c)(2)(B). In August 2010, Congress enacted P.L. 111-229, which raised the maximum annual
mortgage insurance premium that FHA is permitted to charge to the current levels.
35 Most of the changes to the mortgage insurance premiums in recent years have been made administratively by FHA,
although the Temporary Payroll Tax Cut Continuation Act of 2011 (P.L. 112-78), enacted on December 23, 2011,
required FHA to increase the annual mortgage insurance premium it charges by 10 basis points (one-tenth of one
percentage point). A list of changes to the mortgage insurance premiums since 2010, and references to the FHA
Mortgagee Letters that implemented the changes, is available on p. 37 of the FY2016 Annual Report to Congress on the
Financial Status of the MMI Fund, https://portal.hud.gov/hudportal/documents/huddoc?id=2016fhaannualreport1.pdf.
36 U.S. Department of Housing and Urban Development, Mortgagee Letter 2015-01, “Reduction of Federal Housing
Administration (FHA) Annual Mortgage Insurance Premium (MIP) Rates and Temporary Case Cancellation
Authority,” January 9, 2015, http://portal.hud.gov/hudportal/documents/huddoc?id=15-01ml.pdf.
37 U.S. Department of Housing and Urban Development, Mortgagee Letter 13-04, “Revision of Federal Housing
Administration (FHA) Policies Concerning Cancellation of the Annual Mortgage Insurance Premium (MIP) and
Increase to the Annual MIP,” January 31, 2013, http://portal.hud.gov/hudportal/documents/huddoc?id=13-04ml.pdf.
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These premiums apply to most single-family mortgages; FHA charges different annual premiums
in certain circumstances, including for loans with shorter loan terms or higher principal
balances.38
Table 2 shows the statutory maximum amounts that FHA can charge for the up-front and annual
mortgage insurance premiums, as well as the actual up-front and annual MIPs that have been in
effect for most loans since January 26, 2015.
Table 2. Annual and Up-Front Mortgage Insurance Premiums
Since January 26, 2015
Statutory
Maximum
Current
Statutory
Current
Up-Front
Up-Front
Maximum Annual
Annual

MIPa
MIP
MIP
MIP
Initial LTV <= 95%
3%
1.75%
1.50%
0.80%
Initial LTV > 95%
3%
1.75%
1.55%
0.85%
Source: FHA Mortgagee Letters 12-04 and 15-01.
Notes: These premiums apply to most FHA-insured single-family loans, with certain exceptions (such as certain
streamline refinance transactions and FHA-insured reverse mortgages). Different annual premiums apply for
mortgages with loan terms of 15 years or less or mortgages with initial principal balances above $625,500.
a. The statutory maximum up-front MIP for a first-time homebuyer who receives housing counseling is 2.75%.
Premium Cancellation Policy
By law, private mortgage insurance premiums—premiums associated with mortgage insurance
purchased from a private company—must be cancelled when enough mortgage payments have
been made that the loan-to-value ratio reaches a certain threshold.39 This law does not apply to
FHA mortgage insurance premiums. One difference between private mortgage insurance (PMI)
and FHA mortgage insurance is that FHA insures the entire remaining mortgage amount for the
life of the mortgage, while PMI covers only a portion of the mortgage amount.
For a time, FHA had an administrative policy of automatically cancelling the annual mortgage
insurance premium when, based on the initial amortization schedule, the loan balance reached
78% of the initial property value.40 This policy applied for loans that were originated between the
beginning of 2001 through mid-2013. However, for loans with FHA case numbers assigned on or
after June 3, 2013, FHA continues to charge the annual mortgage insurance premium for the life
of the loan for most mortgages.41 This change was made in response to concerns about the

38 These premiums do not apply to certain FHA programs, including Title I loans and Home Equity Conversion
Mortgages (HECMs). Different premiums apply for mortgages with loan terms of 15 years or less or mortgages with
initial principal balances above $625,500. For the premiums charged for these mortgages, see Appendix 1.0 of HUD
Handbook 4000.1.
39 This requirement was enacted in the Homeowners Protection Act of 1998 (P.L. 105-216) and is codified at 12 U.S.C.
Chapter 49.
40 See FHA Mortgagee Letter 00-38, “Single-Family Loan Production – Further Reduction in Upfront Mortgage
Insurance Premiums and Other Mortgage Insurance Premium Changes,” October 27, 2000, http://portal.hud.gov/
hudportal/HUD?src=/program_offices/administration/hudclips/letters/mortgagee/2000ml.
41 FHA Mortgagee Letter 13-04, “Revision of Federal Housing Administration (FHA) Policies Concerning
Cancellation of the Annual Mortgage Insurance Premium (MIP) and Increase to the Annual MIP,” January 31, 2013,
http://portal.hud.gov/hudportal/documents/huddoc?id=13-04ml.pdf. Borrowers whose FHA-insured mortgages have
loan-to-value ratios of 90% or lower at origination can stop paying the annual mortgage insurance premiums after 11
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financial status of the FHA insurance fund. In explaining the change, FHA noted that it had at
times paid insurance claims on defaulted mortgages where the borrowers were no longer paying
annual mortgage insurance premiums. This could occur because FHA insures the remaining
mortgage amount for the life of the loan, and because premiums were cancelled when the loan
amortized to a percentage of the initial property value rather than the current value of the home.
Cancelling premiums based on the initial property value meant that premiums could be cancelled
even if house price declines had left borrowers with little current equity in their homes.42
Options for FHA-Insured Loans in Default
An FHA-insured mortgage is considered delinquent any time a payment is due and not paid. Once
the borrower is 30 days late in making a payment, the mortgage is considered to be in default. In
general, mortgage servicers may initiate foreclosure on an FHA-insured loan when three monthly
installments are due and unpaid, and they must initiate foreclosure when six monthly installments
are due and unpaid, except when prohibited by law.43
Prior to initiating foreclosure, mortgage servicers are to attempt to make contact with borrowers
and evaluate whether they qualify for certain foreclosure avoidance options, known as loss
mitigation.44 The options are to be considered in a specific order, and specific eligibility criteria
apply to each option. Some loss mitigation options, referred to as home retention options, are
intended to help borrowers remain in their homes. Other loss mitigation options, referred to as
home disposition options, will result in the borrower losing his or her home, but avoiding some of
the costs of foreclosure. The loss mitigation options that servicers are instructed to pursue on
FHA-insured loans are summarized in Table 3.45
Additional loss mitigation options are available for certain populations of borrowers. For
example, defaulted borrowers in military service may be eligible to suspend the principal portion
of monthly payments and pay only interest for the period of military service, plus three months.46
On resumption of payment, loan payments are adjusted so that the loan will be paid in full within
the original mortgage term.47 Certain additional loss mitigation options are also available in areas

years.
42 U.S. Department of Housing and Urban Development, Fiscal Year 2012 Annual Report to Congress on the Financial
Status of the Mutual Mortgage Insurance Fund, p. 54, http://portal.hud.gov/hudportal/documents/huddoc?id=
FHAMMIF2012.pdf. At the time, FHA estimated that about 10% of the losses that FHA incurred on defaulted
mortgages occurred after the annual mortgage insurance premiums had been cancelled.
43 24 C.F.R. §203.355. State law may prohibit the start of foreclosure proceedings within the time frame specified by
HUD. Also, military service of the borrower may delay foreclosure proceedings (24 C.F.R. §203.346).
44 Congress authorized FHA to undertake certain types of loss mitigation actions in 1996. The loss mitigation program
replaced an assignment program. Under the assignment program, servicers would assign a defaulted loan to FHA,
which would pay the insurance claim to the lender and then attempt to help the borrower avoid foreclosure directly.
Under the loss mitigation program, servicers are given the responsibility of pursuing loss mitigation options before
completing a foreclosure. P.L. 104-99, the Balanced Budget Downpayment Act, I, terminated the mortgage assignment
program and authorized certain loss mitigation activities.
45 FHA loss mitigation procedures are described in HUD Handbook 4000.1, Section III.A.2.
46 See HUD Handbook 4000.1, Section III.A.2.k.ii and 24 C.F.R. §203.345 and §203.346.
47 In addition, as amended by HERA, the Servicemembers Civil Relief Act (P.L. 108-189) provides certain foreclosure
protections for active duty servicemembers. See HUD Handbook 4000.1, Section III.A.3.i.
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affected by presidentially declared major disasters48 and in response to the COVID-19
pandemic.49
Table 3. Loss Mitigation Options

Possible Remedies for FHA Loans in Default
Forbearance
Forbearance agreements allow a borrower to make partial mortgage payments, or to
suspend mortgage payments, for a specified period of time. FHA forbearance options include
informal forbearance plans, formal forbearance plans, and a special forbearance option for
unemployed borrowers.
FHA-Home
FHA-HAMP uses a loan modification, a partial claim, or a combination of the two to bring a
Affordable
borrower’s mortgage current and provide for affordable mortgage payments.
Modification

A loan modification changes the terms of the mortgage, such as a change in the interest
Program (FHA-
rate or the length of time over which the mortgage is to be repaid.
HAMP)

A partial claim is when the lender advances funds to bring the borrower’s loan current.
FHA pays the lender a partial insurance claim in the amount of the advance, and the
borrower agrees to repay the partial claim amount to FHA when the mortgage matures
or is paid off, or when the property is sold. The partial claim can be used to provide a
limited amount of principal forbearance, as well as to repay the arrearage.
Pre-foreclosure Pre-foreclosure sales allow a borrower to sell the property and use the proceeds to satisfy
sale
the mortgage debt, even if the sale amount is less than the remaining amount owed on the
mortgage.
Deed-in-lieu of
Deeds-in-lieu of foreclosure allow a borrower to deed the property to FHA in exchange for
foreclosure
being released from the mortgage obligation.
Sources: 24 C.F.R. §203, HUD Handbook 4000.1, Section III.A.2, and FHA Mortgagee Letter 2016-14.
Program Funding
FHA’s single-family mortgage insurance program is funded through FHA’s Mutual Mortgage
Insurance Fund (MMI Fund). Cash flows into the MMI Fund primarily from insurance premiums
and proceeds from the sale of foreclosed homes. Cash flows out of the MMI Fund primarily to
pay claims to lenders for mortgages that have defaulted.
This section provides a brief overview of (1) how the FHA-insured mortgages insured under the
MMI Fund are accounted for in the federal budget and (2) the MMI Fund’s compliance with a
statutory capital ratio requirement. For more detailed information on the financial status of the
MMI Fund, see CRS Report R42875, FHA Single-Family Mortgage Insurance: Financial Status
of the Mutual Mortgage Insurance Fund (MMI Fund).

48 FHA’s loss mitigation options in areas affected by presidentially declared disasters are described in HUD Handbook
4000.1, Section III.A.2.n.
49 FHA’s COVID-19 loss mitigation options are described in HUD Handbook 4000.1, Section III.A.2.o and related
FHA Mortgagee Letters. Section 4022 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L.
116-136) provided for mortgage forbearance for borrowers with federally backed mortgages, including FHA-insured
mortgages, who experienced financial hardships due to COVID-19. These forbearance provisions were subsequently
extended administratively. FHA has also established COVID-19-specific loss mitigation options for FHA-insured
mortgages that include particular loan modification and partial claim options for borrowers affected by COVID-19,
including those exiting COVID-19-related forbearance plans.
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FHA Home Loans in the Federal Budget
The Federal Credit Reform Act of 1990 (FCRA) specifies the way in which the costs of federal
loan guarantees, including FHA-insured loans, are recorded in the federal budget.50 The FCRA
requires that the estimated lifetime cost of guaranteed loans (in net present value terms) be
recorded in the federal budget in the year that the loans are insured. When the present value of the
lifetime cash flows associated with the guaranteed loans is expected to result in more money
coming into the account than flowing out of it, the program is said to generate negative credit
subsidy. When the present value of the lifetime cash flows associated with the guaranteed loans is
expected to result in less money coming into the account than flowing out of it, the program is
said to generate positive credit subsidy. Programs that generate negative credit subsidy result in
offsetting receipts for the federal government, while programs that generate positive credit
subsidy require an appropriation to cover the cost of new loan guarantees.51
The MMI Fund has historically been estimated to generate a negative credit subsidy in the year
that the loans are insured and therefore has not required appropriations to cover the expected
costs of loans to be insured. The MMI Fund does receive appropriations to cover salaries and
administrative contract expenses.
The amount of money that loans insured in a given year actually earn for or cost the government
over the course of their lifetime is likely to be different from the original credit subsidy estimates.
Therefore, each year as part of the annual budget process, each prior year’s credit subsidy rates
are re-estimated based on the actual performance of the loans and other factors, such as updated
economic projections. These re-estimates affect the way in which funds are held in the MMI
Fund’s two primary accounts: the Financing Account and the Capital Reserve Account. The
Financing Account holds funds to cover expected future costs of FHA-insured loans. The Capital
Reserve Account holds additional funds to cover any additional unexpected future costs. Funds
are transferred between the two accounts each year on the basis of the re-estimated credit subsidy
rates to ensure that enough is held in the Financing Account to cover updated projections of
expected costs of insured loans.
If FHA ever needs to transfer more funds to the Financing Account than it has in the Capital
Reserve Account, it can receive funds from Treasury to make this transfer under existing
authority and without any additional congressional action.52 This occurred for the first time at the
end of FY2013, when FHA received $1.7 billion from Treasury to make a required transfer of
funds between the accounts. The funds that FHA received from Treasury did not need to be spent
immediately, but were to be held in the Financing Account and used to pay insurance claims, if
necessary, only after the remaining funds in the Financing Account were spent. The MMI Fund
has not needed any additional funds from Treasury to make required transfers of funds between
the two accounts since that time.

50 For more information on how the costs of federal credit programs are treated in the federal budget, see archived CRS
Report R42632, Budgetary Treatment of Federal Credit (Direct Loans and Loan Guarantees): Concepts, History, and
Issues for Congress.
51 In the case of the MMI Fund, offsetting receipts are available to offset the cost of HUD funding for the purposes of
the appropriations process. For more information, see CRS Report R42542, Department of Housing and Urban
Development (HUD): Funding Trends Since FY2002.
52 FHA can receive funds from Treasury to cover higher-than-expected costs of insured mortgages under permanent
and indefinite budget authority granted under the FCRA. The permanent and indefinite budget authority to cover
increased costs of loans and loan guarantees is common to all federal credit programs governed by the FCRA and is not
unique to FHA.
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The Capital Ratio
The MMI Fund is also required by statute to maintain a “capital ratio” of at least 2%, which is
intended to ensure that the fund is able to withstand some increases in the costs of loans
guaranteed under the insurance fund.53 The capital ratio measures the amount of funds that the
MMI Fund currently has on hand, plus the net present value of the expected future cash flows
associated with the mortgages that FHA currently insures (e.g., the amounts it expects to earn
through premiums and lose through claims paid). It then expresses this amount as a percentage of
the total dollar volume of mortgages that FHA currently insures. In other words, the capital ratio
is a measure of the amount of funds that would remain in the MMI Fund after all expected future
cash flows on the loans that it currently insures have been realized, assuming that FHA did not
insure any more loans going forward.
Beginning in FY2009, and for several years thereafter, the capital ratio was estimated to be below
this mandated 2% level. The capital ratio again exceeded the 2% threshold in FY2015, when it
was estimated to be 2.07%.54 This represented an improvement from an estimated capital ratio of
0.41% at the end of FY2014,55 and from negative estimated capital ratios at the ends of FY2013
and FY2012.56 The capital ratio has remained above 2% since that time, and was estimated to be
8.03% in FY2021.57
A low or negative capital ratio does not in itself trigger any special assistance from Treasury, but
it raises concerns that FHA could need assistance in order to continue to hold enough funds in the
Financing Account to cover expected future losses. In the years following the housing market
turmoil that began around 2007, FHA took a number of steps designed to strengthen the insurance
fund.58 These steps included increasing the mortgage insurance premiums charged to borrowers;
strengthening underwriting requirements, such as by instituting higher down payment

53 The capital ratio is established by Section 205 of the National Housing Act, codified at 12 U.S.C. §1711.
54 U.S. Department of Housing and Urban Development, Fiscal Year 2015 Annual Report to Congress on the Financial
Status of the Mutual Mortgage Insurance Fund, November 16, 2015, p. 22, http://portal.hud.gov/hudportal/documents/
huddoc?id=2015fhaannualreport.pdf. The capital ratio calculation for the MMI Fund includes FHA-insured reverse
mortgages, known as Home Equity Conversion Mortgages (HECMs).
55 Beginning in FY2017, FHA’s annual reports to Congress have presented slightly revised capital ratios for FY2012
through FY2016 as a result of an effort to align certain components of the capital ratio with other FHA financial
reporting. The capital ratios cited in the text are the ones that were originally reported, rather than the revised figures.
56 U.S. Department of Housing and Urban Development, Fiscal Year 2014 Annual Report to Congress on the Financial
Status of the Mutual Mortgage Insurance Fund, p. 34. While a negative capital ratio does not mean that FHA is
currently out of money, it does suggest that the funds that FHA currently has on hand, combined with the amount it
expects to earn on mortgages that it currently insures, would not be enough to pay for the losses it expects to incur in
the future on the loans that it currently insures. The calculation of the capital ratio does not take into account any
mortgages that FHA may insure in the future.
57 U.S. Department of Housing and Urban Development, Fiscal Year 2021 Annual Report to Congress Regarding the
Financial Status of the FHA Mutual Mortgage Insurance Fund, pp. 9, 56, https://www.hud.gov/sites/dfiles/Housing/
documents/2021FHAAnnualReportMMIFund.pdf. The capital ratio was estimated at 8.03% in FY2021 despite the
ongoing effects of the COVID-19 pandemic. FHA noted that the strong capital ratio was driven largely by ongoing
house price appreciation, and cautioned about several potential risks to the insurance fund. Such risks include the
possibility of a reversal in house price increases and risks posed by the volume of FHA-insured mortgages that are
delinquent due to the COVID-19 pandemic. See the discussion under “The Impact of Continued Economic
Uncertainty” on pages 64-73 of HUD’s Fiscal Year 2021 Annual Report to Congress Regarding the Financial Status of
the FHA Mutual Mortgage Insurance Fund.
58 For example, see the list of policy changes that FHA had made since 2010 beginning on page 37 of HUD’s Fiscal
Year 2016 Annual Report to Congress on the Financial Status of the FHA Mutual Mortgage Insurance Fund at
https://portal.hud.gov/hudportal/documents/huddoc?id=2016fhaannualreport1.pdf.
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requirements for borrowers with the lowest credit scores; and increasing oversight of FHA-
approved lenders.
Program Activity
Number of Mortgages Insured
The number of new mortgages insured by FHA in a given year depends on a variety of factors. In
general, the number of new mortgages insured by FHA increased during the housing market
turmoil (and resulting contraction of mortgage credit) that began around 2007, reaching a peak of
1.8 million mortgages in FY2009 before beginning to decrease somewhat. FY2014 was the only
year since FY2007 that FHA insured fewer than 1 million new mortgages.
As shown in Table 4, FHA insured about 1.4 million new single-family purchase and refinance
mortgages in FY2021. Together, these mortgages had an initial loan balance of $343 billion.
About 59% (846,248) of the mortgages were for home purchases, while about 41% (586,629)
were for refinancing an existing mortgage.59 FHA insured about 100,000 more mortgages in
FY2021 than it did in FY2020, when it insured about 1.3 million mortgages.
Table 4. Number of New Mortgages Insured by FHA in FY2021

Purchase
Refinance
Total
Number of Mortgages
846,248
586,629
1,432,877
Source: FHA’s FY2021 Annual Report to Congress on the Financial Status of the MMI Fund, p. 88.
Notes: These data do not include FHA-insured reverse mortgages. Numbers reflect FHA’s activity during
FY2021. FHA activity can also be reported for a calendar year rather than a fiscal year; the market share data
included in the Appendix reflect FHA activity during calendar years rather than fiscal years.
Many FHA-insured mortgages are obtained by first-time homebuyers, lower-and moderate-
income homebuyers, and minority homebuyers. Of the home purchase mortgages insured by FHA
in FY2021, nearly 85% were made to first-time homebuyers.60 Roughly one-third of all
mortgages (both for home purchases and refinances) insured by FHA in FY2021 were made to
minority borrowers.61
As shown in Table 5, at the end of FY2021 FHA was insuring a total of about 7.5 million single-
family mortgages that together had an outstanding balance of nearly $1.2 trillion.62 Since it was
first established in 1934, FHA has insured a total of over 52 million single-family mortgages.63

59 U.S. Department of Housing and Urban Development, Fiscal Year 2021 Annual Report to Congress on the Financial
Status of the FHA Mutual Mortgage Insurance Fund, p. 88.
60 U.S. Department of Housing and Urban Development, FHA Annual Management Report Fiscal Year 2021, p. 15.
61 Ibid.
62 U.S. Department of Housing and Urban Development, Fiscal Year 2021 Annual Report to Congress on the Financial
Status of the FHA Mutual Mortgage Insurance Fund, p. 34. These totals do not include Home Equity Conversion
Mortgages (HECMs), which are reverse mortgages insured by FHA.
63 FHA Annual Management Report Fiscal Year 2021, p. 3.
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Table 5. Number and Dollar Volume of FHA-Insured Mortgages Outstanding at the
End of FY2021

Total
Number of Mortgages
7,498,614
Dol ar Volume of Mortgages
$1.191 tril ion
Source: U.S. Department of Housing and Urban Development, Fiscal Year 2021 Annual Report to Congress on the
Financial Status of the FHA Mutual Mortgage Insurance Fund, p. 34.
Note: Figures show the number and dol ar volume of single-family insurance-in-force as of the end of FY2021,
excluding FHA-insured reverse mortgages.
Market Share
Measuring Market Share
FHA’s share of the mortgage market is the amount of mortgages that are insured by FHA
compared to the total amount of mortgages originated or outstanding in a given time period (e.g.,
originated during a calendar year, or outstanding on a specific date). FHA’s market share can be
measured in a number of different ways. Therefore, when evaluating FHA’s market share, it is
important to recognize which of several different figures is being reported.
First, FHA’s share of the mortgage market can be computed as the number of FHA-insured
mortgages divided by the total number of mortgages, or as the dollar volume of FHA-insured
mortgages divided by the total dollar volume of mortgages.
Furthermore, FHA’s market share is sometimes reported as a share of all mortgages, and
sometimes only as a share of home purchase mortgages (as opposed to both mortgages made to
purchase a home and mortgages made to refinance an existing mortgage).
A market share figure can be reported as a share of all mortgages originated within a specific time
period, such as a given year, or as a share of all mortgages outstanding at a point in time,
regardless of when they were originated.
Finally, FHA’s market share is sometimes also reported as a share of the total number of
mortgages that have some kind of mortgage insurance (including mortgages with private
mortgage insurance and mortgages insured by another government agency) rather than as a share
of all mortgages regardless of whether or not they have mortgage insurance.
FHA’s Share of the Mortgage Market
FHA’s market share tends to fluctuate in response to economic conditions and other factors.
Between calendar years 1996 and 2002, FHA’s market share averaged about 14% of the home
purchase mortgage market and about 11% of the overall mortgage market (both home purchase
mortgages and refinance mortgages), as measured by number of mortgages. However, by 2005
FHA’s market share had fallen to less than 5% of home-purchase mortgages and about 3% of the
overall mortgage market as mortgage credit loosened. Subsequently, as economic conditions
worsened and mortgage credit tightened in response to housing market turmoil that began around
2007, FHA’s market share rose sharply, peaking at over 30% of home-purchase mortgages in
2009 and 2010, and over 20% of all mortgages (including both home purchases and refinances) in
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2009. In 2020, FHA insured 17% of new home purchase mortgages and 11% of new mortgages
overall.64
Figure 1 shows FHA’s market share as a percentage of the total number of new mortgages
originated for each calendar year between 1996 and 2020. As described, FHA’s market share can
be measured in a number of different ways. The figure shows FHA’s share of (1) all newly
originated mortgages, (2) just newly originated purchase mortgages, and (3) just newly originated
refinance mortgages. FHA’s share of home purchase mortgages tends to be the highest, largely
because borrowers who refinance are more likely to have built up a greater amount of equity in
their homes and, therefore, might be more likely to obtain conventional mortgages. For the
number of mortgages insured by FHA in each year calendar since 1996, see the Appendix.
Figure 1. FHA’s Share of the Mortgage Market, CY1996-CY2020
Percentage of total number of mortgages originated in each year

Source: Figure created by CRS using data in HUD’s FHA Single-Family Mortgage Market Share Report, 2021 Q1,
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/oe/rpts/fhamktsh/fhamktqtrly.
The increase in FHA’s market share after 2007 was due to a variety of factors related to the
housing market turmoil and broader economic instability that was taking place at the time.
Housing and economic conditions led many banks to limit their lending activities, including
lending for mortgages. Similarly, private mortgage insurance companies, facing steep losses from
past mortgages, began tightening the underwriting criteria for mortgages that they would insure.65
Furthermore, in 2008 Congress increased the maximum mortgage amounts that FHA can insure,

64 See HUD’s FHA Single-Family Mortgage Market Share Report, 2021 Q3, p. 4, available at http://portal.hud.gov/
hudportal/HUD?src=/program_offices/housing/rmra/oe/rpts/fhamktsh/fhamktqtrly. Calendar year 2020 data were the
most recent full-year calendar year data available as of the cover date of this report.
65 For example, see Robert B. Avery, Neil Bhutta, Kenneth P. Brevoort, and Glenn B. Canner, The 2009 HMDA Data:
The Mortgage Market in a Time of Low Interest Rates and Economic Distress, http://www.federalreserve.gov/pubs/
bulletin/2010/articles/2009HMDA/default.htm. See also Radian’s 2010 annual report, available at
https://www.radian.com/who-we-are/for-investors/annual-reports-and-proxy-statements. Page 79 includes a discussion
of Radian, a private mortgage insurer, tightening its underwriting standards.
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which may have made FHA-insured mortgages a more viable option for some borrowers in
certain areas.
Over the last decade, FHA’s market share has decreased from its peak during the housing market
turmoil. A number of factors may have contributed to this decrease, including a decrease in loan
limits in some high-cost areas that took effect in 2014, higher mortgage insurance premiums,66
and greater availability of non-FHA-insured mortgages. While not the focus of this report, the
appropriate market share for FHA has been a subject of ongoing debate among policymakers. It is
likely to continue to be a topic of debate, both in the context of policies specifically related to
FHA as well as part of broader debate about the U.S. housing finance system as a whole.

66 FHA increased the mortgage insurance premiums it charges a number of times beginning in 2010 before decreasing
the annual premium somewhat at the beginning of 2015. The 2015 premium decrease may have contributed to the
increase in FHA’s market share in 2015 and 2016 compared to 2014. See, for example, Neil Bhutta and Daniel Ringo,
“Changing FHA Mortgage Insurance Premiums and the Effects on Lending,” FEDS Note, September 29, 2016,
https://www.federalreserve.gov/econresdata/notes/feds-notes/2016/changing-fha-mortgage-insurance-premiums-and-
the-effects-on-lending-20160929.html, showing that changes in FHA mortgage insurance premiums tend to be
associated with changes in FHA’s market share for home purchase mortgages in particular.
Congressional Research Service

17

link to page 22 link to page 18 FHA-Insured Home Loans: An Overview

Appendix. FHA’s Market Share Since 1996
Table A-1 provides data on the number of mortgages insured by FHA in each calendar year since
1996, along with FHA’s overall market share in each calendar year.
Table A-1. FHA-Insured Mortgage Origination Activity
CY1996-CY2020
FHA-Insured
Home
FHA-Insured
Total FHA-
Total
FHA Share of
Calendar
Purchase
Refinance
Insured
Mortgage
Mortgage
Year
Mortgages
Mortgages
Mortgages
Market
Originations
1996
697,000
123,000
820,000
6,672,000
12.3%
1997
759,000
110,000
869,000
6,233,000
13.9%
1998
788,000
348,000
1,136,000
10,795,000
10.5%
1999
913,000
245,000
1,158,000
12,182,000
9.5%
2000
845,000
66,000
911,000
7,767,000
11.7%
2001
870,000
407,000
1,277,000
11,627,000
11.0%
2002
764,000
412,000
1,176,000
16,922,000
7.0%
2003
630,000
653,000
1,283,000
24,887,000
5.2%
2004
467,000
248,000
716,000
14,319,000
5.0%
2005
323,000
133,000
456,000
14,485,000
3.1%
2006
295,000
116,000
411,000
12,330,000
3.3%
2007
317,000
211,000
528,000
10,294,000
5.1%
2008
845,000
561,000
1,406,000
7,092,000
19.8%
2009
1,088,000
897,000
1,985,000
9,391,000
21.1%
2010
944,000
519,000
1,463,000
8,359,000
17.5%
2011
760,000
322,000
1,082,000
6,813,000
15.9%
2012
738,000
527,000
1,265,000
9,442,000
13.4%
2013
665,000
507,000
1,172,000
8,683,000
13.5%
2014
601,000
182,000
783,000
5,575,000
14.1%
2015
811,000
410,000
1,221,000
6,983,000
17.5%
2016
891,000
413,000
1,304,000
8,198,000
15.9%
2017
852,000
309,000
1,161,000
7,074,000
16.4%
2018
760,000
214,000
974,000
6,584,000
14.8%
2019
778,000
338,000
1,116,000
7,729,000
14.4%
2020
820,000
494,000
1,314,000
11,916,000
11.0%
Source: U.S. Department of Housing and Urban Development, FHA Single-Family Market Share 2021 Q3,
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/oe/rpts/fhamktsh/fhamktqtrly.
Notes: This table reflects FHA activity during calendar years. Data can also be reported for fiscal years; the FHA
program activity data reported in Table 4 in this report reflect fiscal year rather than calendar year activity.
Congressional Research Service

18

FHA-Insured Home Loans: An Overview

Author Information

Katie Jones

Analyst in Housing Policy

Acknowledgments
Bruce E. Foote, retired CRS Analyst in Housing Policy, authored the original version of this report.

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
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copy or otherwise use copyrighted material.

Congressional Research Service
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