In 2006, The Federal Housing Administration, also known as FHA, represented less than 4% of all mortgage transactions nationwide. However, due to the mortgage crash in 2007 followed by a decline in products coupled with more strict guidelines, FHA lending is fast becoming the leading loan type in the nation.

Initially, mortgage lending was handled through banks, offering limited terms such as 3-5 year balloon notes with 9% interest rates and loans of 50% of value; it seemed to be a win-win situation for the banking industry. Although mortgages were short term, it was customary for the bank to renew the mortgage when it became due.

While home ownership was usually reserved for the wealthy, a strong economy was pushing The National Building Association to provide a fierce campaign for home ownership. With "luxury" homes including modern technology springing up everywhere, the appeal was not lost on the middle income family. Based on the strength and stability of jobs and the economy, middle income buyers began to purchase more home than they could afford.

As dream of home ownership spiraled, banks began offering 2nd liens to accommodate meeting the harsh down payment requirements. It was not uncommon for a homeowner to have two loans on a home. However, this did not pose a problem, as resale was rampant and always included a profit. Unemployment was at an all time low and America was on top of the world. From 1925 to 1929, home ownership had increased over 20%.

In 1929, the stock market crashed resulting in the worst housing disaster in American history. Overnight, assets were lost and companies began to close. Out of fear, banks refused to renew mortgage notes and foreclosures were at an all time high. The economy declined and over 2 million jobs in the housing industry were lost. Every industry was affected and the public screamed for the government to help.

President Hoover called a conference in 1931 on "Home Building and Home Ownership". With over 3,700 experts attending, the purpose was to stabilize the housing industry. With full endorsement, the Federal Home Loan Bank Act was established in 1932 which promoted additional sources for home financing. In hopes of stimulating the economy, fervor was put into rebuilding neighborhoods and offer housing to low income families.

President Roosevelt, forced to get further involved with the housing industry, signed into law the Home Owner's Loan Act of and The National Recovery Act in 1933. Using federal funds, the Recovery Act provided refinancing for distressed homeowners facing foreclosure by providing better refinancing terms. During its three year tenure, the government took over 1,000,000 loans.

In further assistance, President Roosevelt formed a committee of four to help develop a solution to the housing problem. Established in 1933 on principals of mortgage reform, the National Housing Act was signed into law in 1934. The Act’s purpose was to provide average and low income families financial choices, put men back to work, improve overall economic conditions and restore confidence.

The law itself, having been modified many times over the years, still maintains the initial fundamentals it was developed for. Known as FHA financing, it is based on leading the way for home financing, attracting lenders by providing insurance on the mortgage loan, sets a maximum loan amount and longer amortization periods, collects monthly mortgage insurance from the borrower to fund the program and offers charters to finance companies. The Act also included the provision that insures deposits placed in financial institutions.

With strong support from the Secretary of Labor and despite opposition from Congress, once the bill was introduced, it took less than six weeks to become law and FHA financing was born. As they say, the rest is history.