Question 37

The function of the FHA is to insure loans on real property made by approved lending institutions.

The Federal Housing Administration (FHA) primarily functions to insure loans on real property, which helps facilitate home financing through approved lending institutions.

A) insure loans on real property made by approved lending institutions.

This option accurately describes the primary role of the FHA, which is to provide insurance to lenders against losses on loans made for purchasing homes. This insurance encourages lenders to offer more favorable terms to borrowers, thereby promoting home ownership.

B) insure mortgagors' real property against physical hazards.

This option is incorrect as it misrepresents the FHA's function. While homeowners may need insurance for physical hazards, the FHA does not provide this type of insurance; rather, it insures loans themselves.

C) build government subsidized housing.

This option is not correct because the FHA does not directly build or manage housing. Its main role is to provide insurance for loans, not to create housing projects.

D) lend money to buyers of properties occupied by one to four families.

This option is incorrect since the FHA does not lend money itself. Instead, it insures loans made by approved lenders, allowing those lenders to offer financing to homebuyers.

Conclusion

The correct answer, A, clearly defines the FHA's function of insuring loans, which is essential for stimulating the housing market and making home ownership accessible. All other options misrepresent the FHA's role, either by suggesting it provides direct housing assistance or insures against physical damages, which are not within its scope.