This paper reviews the evolution of the major credit and insurance programs undertaken by the U.S. government in support of urban housing. As the review makes clear, the Federal Housing Administration (FHA), Veterans Administration, Federal National Mortgage Association, and Federal Home Loan Mortgage Corporation have played major roles in the development of liberal and efficient primary and secondary mortgage markets in the United States. The development of capacity in mortgage lending and securitization in the private sector does suggest, however, that federally subsidizing mortgage market activities can be restrained with little effect on homeownership—the principal goal of this federal activity. In particular, the orderly reduction in the mortgage investment activities of the government-sponsored enterprises (GSEs) and the imposition of guarantee fees on mortgage-backed securities insured by the GSEs are first steps in restraining federal activity. More generally, a concentration of FHA and GSE activity on first-time homebuyers would reduce federal risk exposure while preserving the economic rationale for government activity.

Federal policy affecting housing is dominated by indirect off-budget activities—tax expenditure policies and credit, insurance, and guarantee programs—rather than the direct subsidy of housing production or the payment of shelter allowances to deserving households. This paper reviews federal activity in providing credit and insurance for housing. I begin by reviewing mortgage insurance and guarantee programs: the Federal Housing Administration (FHA) and the Veterans Administration (VA). These large programs are administered by different cabinet agencies: the Department of Housing and Urban Development (HUD) and the Department of Veterans Affairs, respectively.