Final answer:
The statement that the Federal Housing Administration (FHA) provides mortgage insurance to lenders is true. option 1
Step-by-step explanation:
The statement that the Federal Housing Administration (FHA) provides mortgage insurance to lenders is true. This government agency was established to revitalize the housing market during the Great Depression by making it easier and less risky for banks to grant loans.
By insuring mortgages, the FHA provides lenders with the assurance that they will be repaid even if the borrower defaults, which encourages them to offer loans with lower down payments and more favorable terms to borrowers.
The FHA's impact on the housing market has been significant. It was instrumental in increasing the homeownership rate from around 40% during the Great Depression to about 70% in recent years, with a considerable surge occurring in the period following World War II.
Yet, this success came with controversies. For example, the FHA policies have been criticized for encouraging discriminatory practices like redlining, which affected minorities' ability to obtain mortgages.
When the government changes bank regulations, making it cheaper and easier for banks to make home loans, this typically includes aspects like the aforementioned FHA mortgage insurance.
Furthermore, homebuyers who are unable to provide the standard 20% down payment might still be eligible to secure a mortgage with a much lower down payment, between 0% and 3.5%. However, these loans often require mortgage insurance, which could increase the total cost of the mortgage over time. Option 1