Real Estate Financing and Settlement Practice Exam

The entity that typically insures FHA loans is the U.S. Department of Housing and Urban Development (HUD). This department oversees the Federal Housing Administration (FHA), which specifically provides insurance for loans that meet their guidelines. FHA insurance protects lenders against losses that may arise from borrower defaults, enabling them to offer loans with lower down payments and more favorable terms, making home ownership more accessible to a broader range of buyers.

While the Federal Housing Finance Agency oversees government-sponsored enterprises involved in mortgage financing, it does not provide insurance for loans. Private mortgage insurance companies might insure conventional loans but are not involved in FHA loans. State housing agencies often provide assistance or programs for homebuyers but do not typically insure FHA loans. Thus, HUD plays a critical role in the safety and security of the FHA loan program, ensuring that it meets its mission of fostering homeownership.