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61-572: Ginnie Mae guarantees only securities backed by single-family and multifamily loans insured by government agencies, including the Federal Housing Authority , Department of Veterans Affairs , the Department of Housing and Urban Development’s Office of Public and Indian Housing, and the Department of Agriculture’s Rural Development. Ginnie Mae neither originates nor purchases mortgage loans nor buys, sells or issues securities. The credit risk on

122-504: A Federal Housing Commissioner who concurrently held the position of Assistant Secretary. This Commissioner would be responsible for both FHA-specific functions and the administration of other HUD programs related to the private mortgage market. While the FHA and HUD share some commonalities, they also exhibit differences in their roles and responsibilities. The designated Commissioner would assume authority over all departmental programs pertaining to

183-550: A failed policy are killing the neighborhoods around them". HUD Assistant Secretary for Fair Housing Roberta Achtenberg has been quoted as saying "HUD walks a tightrope between free speech and fair housing. We are ever mindful of the need to maintain the proper balance between these rights." Libertarian critic James Bovard commented that, "The more aggressive HUD becomes, the fewer free speech rights Americans have. Many words and phrases are now effectively forbidden in real estate ads... Apparently, there are two separate versions of

244-419: A house with a mere ten percent down payment, with the remaining ninety percent financed through a 25-year, self-amortizing, FHA-insured mortgage loan. Following World War II , the FHA played a pivotal role in financing homes for returning white veterans and the families of white soldiers. Its assistance extended to the purchase of both single-family and multifamily homes. During the 1950s, 1960s, and 1970s,

305-501: A perceived need to further broaden the capital base available for mortgages, that the housing finance system began to resemble its current form. As part of the Housing and Urban Development Act of 1968 , Congress partitioned Fannie Mae into two entities: In 1970, Ginnie Mae became the first organization to create and guarantee MBS products and has continued to provide mortgage funds for homebuyers ever since. Today, Ginnie Mae securities are

366-509: A period marked by numerous bank failures , there was a substantial decline in both the availability of home loans and the rate of home ownership. During this era, the majority of home mortgages were characterized by short-term durations, typically spanning from three to five years. These mortgages lacked amortization features and often featured balloon payment structures . Additionally, the loan-to-value (LTV) ratios for these mortgages generally remained below sixty percent. This situation posed

427-446: A predetermined maximum limit. Among these criteria, the two most pivotal were "Relative Economic Stability," accounting for 40% of the appraisal value, and "protection from adverse influences," contributing an additional 20%. In 1935, the FHA furnished its appraisers with an Underwriting Manual, which included the following directive: "If a neighborhood is to retain stability it is necessary that properties shall continue to be occupied by

488-532: A role in inflating the United States housing bubble , which ultimately led to the subprime mortgage crisis and nearly caused the collapse of the housing market. Following the subprime mortgage crisis , The FHA, in conjunction with Fannie Mae and Freddie Mac , emerged as a substantial provider of mortgage financing in the United States. Notably, the proportion of home purchases funded through FHA mortgages saw

549-454: A significant obstacle for many working and middle-class families, rendering home ownership financially unattainable. During the banking crisis of the 1930s, all lenders were compelled to call in their outstanding mortgages, leaving no room for refinancing . Consequently, numerous borrowers, who were now unemployed and grappling with financial hardships, found themselves unable to meet their mortgage obligations. This unfortunate circumstance led to

610-468: A strong incentive to steer borrowers towards these subprime products, even when these borrowers qualified for FHA loans, which were considered safer. As the subprime mortgage market experienced significant growth, the FHA's share of the mortgage market declined. For instance, in 2001, FHA-insured loans accounted for 14% of home-purchase mortgages. However, by 2005, this percentage had dropped to less than 3%. The surge in these unregulated subprime loans played

671-558: A substantial increase, rising from a mere 2 percent to over one-third of all mortgages in the United States. This growth was in response to a contraction in conventional mortgage lending during a credit crunch period. By the year 2011, the FHA was responsible for backing approximately 40% of all home purchase loans in America. Since the year 2008, the FHA has supported more than 4 million loans and facilitated mortgage refinancing for 2.6 million families, resulting in reduced monthly payments. With

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732-455: A substantial number of homes being foreclosed upon, which, in turn, precipitated a sharp decline in the housing market. Banks, in the process of foreclosure , acquired the collateral in the form of foreclosed homes. However, the depressed property values at that time meant that these assets had limited value. In response to these challenges, a comprehensive restructuring of the federal banking system took place in 1934. This overhaul culminated in

793-513: Is appointed by the President and subject to Senate confirmation. He or she is responsible for conducting and supervising audits , investigations, and inspections relating to the programs and operations of HUD. The OIG is to examine, evaluate and, where necessary, critique these operations and activities, recommending ways for the department to carry out its responsibilities in the most effective, efficient, and economical manner possible. The mission of

854-481: Is one of the executive departments of the U.S. federal government . It administers federal housing and urban development laws. It is headed by the secretary of housing and urban development , who reports directly to the president of the United States and is a member of the president's Cabinet . Although its beginnings were in the House and Home Financing Agency, it was founded as a Cabinet department in 1965, as part of

915-730: The Great Recession . In 1934, during the depths of the Great Depression , the United States Congress responded to the crisis by passing the National Housing Act of 1934 , which established the Federal Housing Administration (FHA). One of the principal objectives of the FHA was to increase the flow of capital to the housing markets by insuring private lenders against the risk of mortgage default. FHA also

976-445: The National Housing Act of 1934 . Its primary function is to provide insurance for mortgages originated by private lenders for various types of properties, including single-family homes, multifamily rental properties, hospitals, and residential care facilities. FHA mortgage insurance serves to safeguard these private lenders from financial losses. In the event that a property owner defaults on their mortgage, FHA steps in to compensate

1037-467: The " Great Society " program of President Lyndon B. Johnson , to develop and execute policies on housing and metropolises. The idea of a department of Urban Affairs was proposed in a 1957 report to President Dwight D. Eisenhower, led by New York Governor Nelson A. Rockefeller. The idea of a department of Housing and Urban Affairs was taken up by President John F. Kennedy, with Pennsylvania Senator and Kennedy ally Joseph S. Clark Jr. listing it as one of

1098-450: The 1980s, when economic conditions did not favor increased homeownership, the FHA helped stabilize falling property prices, enabling potential homeowners to secure financing, especially in regions where private mortgage insurers had withdrawn due to economic challenges, such as oil-producing states. The Federal Housing Administration (FHA) has had its most pronounced impact on minority populations and urban areas. In particular, nearly half of

1159-471: The Bill of Rights -- one for private citizens and the other for federal bureaucrats and politicians". In 2006, The Village Voice named HUD "New York City's worst landlord" and "the #1 worst in the United States" based upon decrepit conditions of buildings and questionable eviction practices. In September 2010, HUD started auctioning off delinquent home mortgage loans, defined as at least 90 days past due, to

1220-554: The FHA is under the leadership of Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon. The Federal Housing Administration (FHA) was under the leadership of the Federal Housing Commissioner Raymond M. Foley from 1945 to 1947. and Franklin D. Richards from 1947-1952. In 1954 Norman P. Mason was appointed as the Federal Housing Commissioner. Amid the Great Depression ,

1281-482: The FHA lends its support to the construction of both affordable and market-rate rental properties, along with the establishment of hospitals and residential care facilities, not only in communities throughout the United States but also in its territories . It's important to distinguish the FHA from the Federal Housing Finance Agency (FHFA), which oversees government-sponsored enterprises . Presently,

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1342-406: The FHA played a crucial role in catalyzing the construction of millions of privately owned apartments designed for elderly, handicapped, and lower-income Americans. In the 1970s, amid soaring inflation and energy costs that threatened the viability of numerous private apartment buildings, the FHA's emergency financing provided essential support to financially struggling properties. Additionally, during

1403-547: The FHA was essentially bankrupt. Since its establishment in 1934, the FHA and HUD have collectively provided insurance for nearly 50 million home mortgages. Presently, the FHA holds a portfolio that includes approximately 8.5 million insured single-family mortgages, as well as more than 11,000 insured multifamily mortgages. Additionally, it encompasses over 3,900 mortgages dedicated to hospitals and residential care facilities. A borrower has several options for sourcing their down payment . The 3.5% requirement can be met by using

1464-445: The FHA's appraisal criteria, which stipulated a whites-only occupancy requirement, racial segregation became an integral component of the federal mortgage insurance program. This occurred because the FHA often classified properties in racially mixed neighborhoods or those in close proximity to black neighborhoods as high-risk, effectively endorsing and enforcing racial segregation as an official requirement. In 1938, Congress established

1525-419: The FHA's business in metropolitan areas is concentrated in central cities, a significantly higher proportion than that observed with conventional loans. The FHA has also extended loans to a larger proportion of African Americans , Hispanic Americans , as well as younger borrowers with limited credit, playing a role in the growth of homeownership within these demographic groups. However, as the capital markets in

1586-1056: The FHA, Department of Veterans Affairs , the Department of Housing and Urban Development’s Office of Public and Indian Housing, and the Department of Agriculture’s Rural Development. One of the newer mortgage types they insure is the RG pool, a new pool type being deployed by Ginnie Mae to securitize the Re-performing Loans affected by the Special Restrictions on Re-performing Loans Related to COVID-19 Pandemic published in APM 20-07. Ginnie Mae neither originates nor purchases mortgage loans. It does not purchase, sell, or issue securities. Accordingly, Ginnie Mae does not use derivatives to hedge and it does not carry long-term debt (or related outstanding securities liabilities) on its balance sheet. Instead, private lending institutions approved by Ginnie Mae originate eligible loans, pool them into securities, and issue

1647-526: The Federal Housing Administration (FHA) had a significant impact on the housing market in the United States. Homeownership rates experienced a notable increase, rising from 40% in the 1930s to 61% and 65% by 1995. The peak of homeownership was nearly 69% in 2005, coinciding with the height of the US housing bubble. Within just four years of the FHA's inception in 1934, prospective homeowners could secure

1708-625: The Federal National Mortgage Association, commonly known as Fannie Mae . This creation played a pivotal role in setting up a secondary mortgage market, enabling banks and investors to buy and sell existing home loans. Following the enactment of the Serviceman's Readjustment Act, popularly known as the GI Bill , in 1944, the FHA orchestrated a system of long-term mortgages to facilitate the construction and sale of private homes. Under

1769-675: The GI Bill, the Veteran's Administration introduced a home-loan guarantee program that allowed veterans to make a down payment of only one dollar, making homeownership more accessible to them. These transformative changes contributed significantly to a surge in American homeownership, with the percentage of families residing in owner-occupied homes increasing from 44% to 63% between 1934 and 1972. In 1935, Colonial Village in Arlington County, Virginia ,

1830-705: The Ginnie Mae MBS instruments. These institutions include geographically diverse mortgage companies, commercial banks, and thrifts of all sizes, as well as state housing finance agencies. Federal Housing Authority The Federal Housing Administration ( FHA ), also known as the Office of Housing within the Department of Housing and Urban Development (HUD), is a United States government agency founded by President Franklin Delano Roosevelt , established in part by

1891-578: The Office of Inspector General (OIG) is to: The OIG accomplishes its mission by conducting investigations pertinent to its activities; by keeping Congress, the Secretary, and the public fully informed of its activities, and by working with staff (in this case of HUD) in achieving success of its objectives and goals. The Honorable Rae Oliver Davis, who was appointed on January 23, 2019, is the current Inspector General. The Department of Housing and Urban Development

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1952-562: The United States evolved over the course of several decades, the influence of the FHA waned. By 2006, FHA loans constituted less than 3% of all loans originated in the United States. In the fiscal year 2019, FHA-insured mortgages represented 11.41% of the total dollar volume for single-family residential mortgage originations. Notably, 82.84% of these FHA-insured single-family forward purchase transaction mortgages in fiscal year 2019 were availed by first-time homebuyers. Furthermore, minorities accounted for 36.24% of FHA purchase mortgage borrowers in

2013-476: The United States were in Cincinnati and Cleveland. In 1965, the Federal Housing Administration was integrated into the Department of Housing and Urban Development following the enactment of the Department of Housing and Urban Development Act of 1965. With the integration of the FHA into HUD, it transformed into a distinct entity within the larger HUD framework. Under this arrangement, the FHA would be overseen by

2074-410: The borrower's personal funds or by receiving a qualified gift from a family member or another eligible source. FHA insurance payments consist of two components: the upfront mortgage insurance premium (UFMIP) and the annual premium, which is paid monthly and referred to as the mutual mortgage insurance (MMI). The UFMIP is a mandatory payment that can be paid in cash at the time of closing or included in

2135-492: The calendar year 2018, a significant contrast to the 19.94% observed through conventional lending channels. The Federal Housing Administration (FHA) implemented mortgage underwriting standards that had a discriminatory impact on minority neighborhoods. This discriminatory practice is evident in the fact that between 1945 and 1959, African Americans received less than 2 percent of all federally insured home loans. As subsidized mortgage insurance became increasingly significant in

2196-437: The challenges faced by homebuyers, 13% of all buyers and 24% of those under the age of 37 find the down payment requirement to be the most daunting task. On average, the down payment amount is $ 6,624. FHA borrowers have an average debt-to-income ratio of 40.34%, and the typical FHA loan amount is $ 191,650. It's worth noting that a minimum credit score of 580 with a down payment of 3.5% is required to qualify. The establishment of

2257-595: The completion of a special study group report on the federal role in solving urban problems. HUD is administered by the U.S. Secretary of Housing and Urban Development . Its headquarters is located in the Robert C. Weaver Federal Building . Some important milestones for HUD's development include: The major program offices are: The United States Congress enacted the Inspector General Act of 1978 to ensure integrity and efficiency in government. The Inspector General

2318-424: The conclusion of relatively short mortgage terms, typically spanning 5 to 10 years. Moreover, prospective homebuyers were required to make substantial down payments, often ranging from 30% to 50% of the property's value. With the advent of FHA-insured loans, the down payment requirement was significantly reduced, with borrowers now only needing to provide as little as 10% down. Furthermore, the mortgage repayment period

2379-613: The department's lax oversight of their program allowed the fraud to occur. In 1997, the HUD Inspector General issued a report saying: "The program design encourages risky property deals, land sale, and refinance schemes, overstated property appraisals, and phony or excessive fees." In June 1993, HUD Secretary Henry Cisneros admitted that "HUD has in many cases exacerbated the declining quality of life in America." In 1996, Vice President Al Gore , referring to public housing projects, declared that, "These crime-infested monuments to

2440-405: The duration of MIP payments is determined by factors including loan term, LTV ratio, and previous payment history. The upfront mortgage insurance premium (UFMIP) is a fixed 1.75% of the base loan amount and is mandatory, payable in cash at closing or financed into the loan. These MIP payments are a fundamental component of FHA mortgage insurance, serving to protect lenders from potential losses. In

2501-406: The enactment of the National Housing Act of 1934 , which gave rise to the Federal Housing Administration (FHA). The FHA was established with the specific aim of regulating the interest rates and terms associated with insured mortgages. Prior to the establishment of the FHA, the prevailing mortgage landscape featured predominantly balloon mortgages, which necessitated substantial lump-sum payments at

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2562-415: The highest bidder. It sold 2,000 loans in six national auctions. In 2012, this sale was massively increased under a "Distressed Asset Stabilization Program" (DASP), and the 100,000 loans sold as of 2014 have netted $ 8.8 billion for the FHA, rebuilding cash reserves that had been depleted by loan defaults. The second stated and eponymous objective is to stabilize communities, by requiring purchasers to service

2623-400: The housing market, property values in minority neighborhoods within inner cities experienced a sharp decline. Additionally, approval rates for mortgage loans among minority applicants remained exceedingly low. Beginning in 1935, the FHA instituted guidelines designed to discourage private mortgage investors from extending loans to properties in minority areas. This practice, known as redlining ,

2684-554: The issuance of securities on Wall Street . MBS instruments are commonly referred to as "pass-through" certificates because the principal and interest of the underlying loans is "passed through" to investors; because of Ginnie Mae's financial backing, these MBS instruments are particularly attractive to investors and, like other Agency MBS instruments, are eligible to be traded in the "to-be-announced," or "TBA" market. Ginnie Mae guarantees only securities backed by single-family and multifamily loans insured by government agencies, including

2745-451: The lender for the outstanding principal balance . Under this insurance arrangement, lenders assume a diminished level of risk, thereby allowing them to offer a larger number of mortgages. The primary mission of the Federal Housing Administration (FHA) is to facilitate access to reasonably priced mortgage financing, with a particular focus on individuals with low to moderate incomes and those embarking on their first home purchase. Furthermore,

2806-433: The loan amount. The annual Mortgage Insurance Premium (MIP) for FHA-insured mortgages varies depending on factors such as the base loan amount, loan-to-value (LTV) ratio, and loan term. For a typical 30-year mortgage, the annual MIP rate ranges from 0.80% to 1.05%. Homebuyers who opt for a 15-year mortgage experience lower MIP rates, ranging from 0.45% to 0.95%. For loans with FHA Case Numbers assigned on or after June 3, 2013,

2867-427: The loans in a manner that stabilizes the surrounding communities by getting the loans to re-perform, renting the home to the borrower, gifting the property to a land bank or paying off the loans in full. An audit published August 2014 found "only about 11 percent of the loans sold through DASP [were] considered 're-performing'". "Rather than defaulting—[FHA] keeps many of the properties they’re tied to from going through

2928-541: The mortgage collateral underlying its mortgage-backed securities primarily resides with other insuring government agencies. Ginnie Mae is similar to Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) with the difference being that Ginnie Mae is a wholly owned government corporation whereas Fannie Mae and Freddie Mac are " government-sponsored enterprises " (GSEs), which are federally chartered corporations privately owned by shareholders. Today, Ginnie Mae securities are

2989-589: The only mortgage-backed securities that are backed by the " full faith and credit " guaranty of the United States Federal Government, although some have argued that Fannie Mae and Freddie Mac securities are de facto or "effective" beneficiaries of this guarantee after the Federal Government rescued them from insolvency and placed them under government conservatorship in September 2008 during

3050-576: The only mortgage-backed securities that are backed by the " full faith and credit " guaranty of the United States government, although some have argued that Fannie Mae and Freddie Mac securities are de facto or "effective" beneficiaries of this guarantee after the US government rescued them from insolvency in 2008. Ginnie Mae guarantees the timely payment of principal and interest payments on residential mortgage-backed security (MBS) instruments to institutional investors worldwide. These securities, or “pools” of mortgage loans, are used as collateral for

3111-467: The pool of white Americans who could manage both the initial down payment for a house and the ongoing monthly mortgage payments. Consequently, this expansion significantly enlarged the market for single-family homes. The FHA employed a specific methodology for assessing the appraisal value of properties, relying on eight distinct criteria. It instructed its agents, known as "appraisers," to allocate more funding to projects with higher appraised values, up to

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3172-481: The present day, approximately 46% of first-time homebuyers in the United States utilize FHA loans for their home purchases. Notably, 1 in 16 FHA loan borrowers maintains a credit score below 600, while the average credit score among first-time FHA loan borrowers stands at 677. These first-time homebuyers account for 82% of all FHA purchase loans. Additionally, 23% of all homebuyers opt for an FHA loan, with 28% of those aged 37 or younger choosing this financing option. Among

3233-560: The private mortgage market, in addition to their dual roles as Assistant Secretary and head of the FHA. The FHA and HUD both help borrowers with bad credit and insufficient down payment to be able to buy or repair a house. In the late 1990s, a new category of mortgage products known as subprime mortgages emerged and began to compete with the traditional mortgages that were financed by the FHA. These subprime products were often poorly underwritten, if they were underwritten at all, and offered higher profits for lenders. Consequently, lenders had

3294-432: The private subprime market, many of the riskiest buyers borrowed from the FHA instead, exposing the FHA to substantial potential losses. At the time, these possible losses were estimate as up to $ 100 billion. The troubled loans weighed heavily on the FHA's capital reserve fund, which by early 2012 had fallen below its congressionally mandated minimum of 2%, in contrast to more than 6% two years earlier. By November 2012,

3355-407: The same social and racial classes. A change in social or racial occupancy generally leads to instability and a reduction of values." Appraisers were further instructed to assign superior property and zoning ratings in areas deemed to have "protection against some adverse influences." The manual characterized these adverse influences as "infiltration by inharmonious racial or nationality groups." Due to

3416-429: The top seven legislative priorities for the administration in internal documents. The department was established on September 9, 1965, when Lyndon B. Johnson signed the Department of Housing and Urban Development Act into law. It stipulated that the department was to be created no later than November 8, sixty days following the date of enactment. The actual implementation was postponed until January 14, 1966, following

3477-527: Was authorized a budget for Fiscal Year 2015 of $ 48.3 billion. The budget authorization is broken down as outlined in the following chart. A scandal arose in the 1990s when at least 700 houses were sold for profit by real estate speculators taking the loans; at least 19 were arrested. The scandal devastated the Brooklyn and Harlem housing market, with $ 70 million in HUD loans going into default . Critics said that

3538-547: Was extended, spanning from 20 to 30 years. In 1934, following its establishment, the FHA enlisted the expertise of Homer Hoyt as Chief Land Economist. His role was pivotal in formulating the initial underwriting criteria for FHA-insured mortgages, a process that ultimately led to the development of the Redlining policy. It is important to note that these innovative lending practices were, in some regions, exclusively available to white Americans. These practices effectively expanded

3599-530: Was made illegal by the Fair Housing Act of 1968 . Redlining has had long-lasting effects on minority communities. The legacy of redlining continues to exert its influence today in certain regions of the United States. Redlining has had a detrimental impact on the contemporary wealth gap between African Americans and White Americans. Department of Housing and Urban Development The United States Department of Housing and Urban Development ( HUD )

3660-432: Was tasked with chartering and regulating a national mortgage association that would buy and sell FHA-insured mortgages. In 1938, Congress amended the act to create the Federal National Mortgage Association, more commonly known as " Fannie Mae ", to help mortgage lenders gain further access to capital for mortgage loans. The provisions of the act changed gradually over the years. It was not until 1968, however, in response to

3721-620: Was the first large-scale, rental housing project erected in the United States that was Federal Housing Administration-insured. During World War II, the FHA financed a number of worker's housing projects including the Kensington Gardens Apartment Complex in Buffalo, New York . During the Great Depression, Ohio Cities used federal government funds for building housing projects and first two of those projects completed in

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