The Federal Housing Administration’s (FHA) long history in the housing market dates back to its creation in 1934 during the Great Depression. However, its current policy focus was set by the National Affordable Housing Act (NAHA) of 1990, which encouraged the agency to help two groups—first-time homebuyers and financially constrained households without meaningful down payments to become successful owners. The NAHA envisioned FHA doing so by operating a mortgage insurance guarantee program that would be sustainable in the sense that it was self-supporting and would not require taxpayer bailouts via capital infusions from the US Department of the Treasury. The evidence reviewed in this report shows that FHA has failed both its intended program beneficiaries and US taxpayers. Recent estimates project cumulative default rates of between 15 and 30 percent among borrowers who purchased since 2007, when FHA began a major program expansion that more than tripled the size of its mortgage guarantee portfolio.1 Thus, sustainable homeownership is not being realized by a large fraction of the buyers whose loans FHA guarantees. Moreover, FHA’s Single-Family Mutual Mortgage Insurance Fund is insolvent.2 This insolvency might still be justified if FHA were successful at helping its two target populations achieve sustainable homeownership experiences. However, the twin financial and policy failures raise obvious questions of whether FHA should be allowed to continue, and if so, how to reform the agency. I recommend terminating FHA by slowly but steadily phasing it out over the next few years and replacing it with a subsidized savings program that would provide government matches of individual household savings. A multiyear phaseout of at least three to five years is needed to ensure that there is no sudden negative shock to the residential mortgage market that would immediately depress the supply of debt capital to the housing sector. The goal of the new saving program is to help households build an economically meaningful 10 percent down payment so that the private credit markets would be willing to provide an appropriately priced mortgage for such a borrower.