What is the role of the Federal Housing Administration (FHA)?

The correct choice reflects the primary function of the Federal Housing Administration (FHA), which is to insure loans made by approved lenders. This insurance protects lenders from losses due to borrower defaults, thereby encouraging them to offer more loans to homebuyers, especially those who may not have sufficient down payments or strong credit histories. By providing this insurance, the FHA plays a crucial role in increasing homeownership rates and making housing more accessible, especially for first-time buyers and low- to moderate-income families.

In contrast, the other options describe functions that are not part of the FHA's mission. The agency does not regulate housing prices; rather, it focuses on mortgage insurance. While it does not provide grants for home improvements directly, other programs or organizations might address that need. Additionally, tax deductions for homeowners are typically administered at the federal or state tax level and are not the responsibility of the FHA. Overall, the FHA's loan insurance plays a fundamental role in the real estate market by facilitating access to housing finance.