The National Housing Act was passed in 1934 to help Americans afford housing and home loans during the Great Depression. The act created the Federal Housing Administration (FHA) to ensure safe housing and a stable mortgage market, and the Federal Savings and Loan Insurance Corporation to prevent unfair foreclosures. The act allowed the government to restructure the banking system, manage interest rates, and secure mortgage terms, resulting in an increase in the size of the market and eventual recovery. To receive an FHA mortgage loan, applicants must meet certain criteria.
During the Great Depression, a series of laws were passed to help the economy recover. One such piece of legislation, the National Housing Act, was passed in 1934. The act was created to help the American people afford housing and home loans.
Two organizations were created in conjunction with the National Housing Act. The Federal Housing Administration, or FHA, is responsible for making sure homes are in a safe condition. It is designed to help maintain a livable standard of housing for the American people. The FHA also operates a home finance system by insuring mortgage loans to ensure market fairness. Another job the FHA does is to make sure the mortgage market remains stable.
The other branch of the National Housing Act is the Federal Savings and Loan Insurance Corporation. This company was created to prevent banks from unfairly foreclosing American homes. While intended to help people achieve and maintain property, these groups initially did little to address inner-city housing or urban sprawl. The FHA merged with the Department of Housing and Urban Development, or HUD, in 1965.
When the American banking system failed during the Great Depression, it had a dramatic decline in the number of people who could own homes or get a home loan. Regulation was hasty, with very short mortgage terms and no refinancing options.
Along with the bank failures, lenders have been pooling all of their mortgages in an effort to recover. These conditions, in addition to the high unemployment rate, have led to families being unable to maintain their payments, often homeless. The housing market was then severely damaged. The banks and lenders that recovered their overdue mortgages did not recover either, as most property values were very low.
These conditions continued, with very few loans approved and few homes purchased, until government intervention in 1934. The National Housing Act allowed the government to restructure the federal banking system. Interest rates were managed, mortgage terms were fixed and secured, and people were once again able to buy new homes. This has also resulted in an increase in the size of the market and an eventual recovery across the nation.
Under the National Housing Act, more Americans may be able to get affordable housing. To receive an FHA mortgage loan, a few criteria must be met. Applicants must have consistent work history, credit in good standing and consistent income growth within the past two years of employment. Mortgages can be made with payments of up to thirty percent or less of the buyer’s total monthly income.
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