FHA provides mortgage insurance to encourage lenders to make homeownership possible for people who need lower down payments and more flexible underwriting than are permitted by the private conventional market. This paper reviews FHA's role in expanding homeownership and its ongoing contributions to affordable lending. The authors find that low-income and minority groups continue to rely heavily on FHA for access to homeownership, even though conventional lenders substantially improved their affordable lending performance during the 1990s. Significant income and racial gaps in homeownership, combined with the fact that minorities are becoming a larger share of our population, suggest that a strong FHA is needed to ensure that all families have access to mortgage credit and homeownership.
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