What is the primary function of the Federal Housing Administration (FHA)?

The primary function of the Federal Housing Administration (FHA) is to insure loans made by approved lenders. This insurance protects lenders against losses that may occur if a borrower defaults on their mortgage. By providing this insurance, the FHA encourages lenders to offer loans to a wider range of borrowers, including those with lower credit scores or limited resources for a down payment. This role is crucial for expanding homeownership opportunities and stabilizing the housing market.

In contrast, while some entities are involved in providing loans, the FHA does not directly lend money to borrowers. Similarly, it does not have the authority to regulate mortgage rates, as this is generally determined by market factors and the lenders themselves. Additionally, the management of Fannie Mae and Freddie Mac falls outside of the FHA's responsibilities, as these are government-sponsored enterprises that primarily focus on the secondary mortgage market.