National Housing Act
Candlefocus EditorThe FHA also benefited borrowers by making it easier to qualify for a mortgage and by reducing the amount of capital down payment necessary to buy a house. These features, determined by the Housing and Home Finance Agency, established the FHA as the source of financing for homes in a variety of neighbors, stimulating demand and homeownership within the private market.
The National Housing Act also established standards for appraisals and underwriting, aiming to guarantee that lenders provided fair and timely service to their borrowers. In order to achieve this goal, the FHA designed a set of underwriting guidelines for lenders, including requiring a down payment of no less than 5 percent, recommending homebuyers have a steady job, and ensuring that lenders considered income capacity and additional factors in approving a loan.
In addition, the Act established certain rules reinforcing existing patterns of racial discrimination in lending and segregation in housing. It encouraged real estate agents, lenders and developers to limit buyers to certain neighborhoods, granting special privileges to white people to the detriment of minority neighborhoods in need of development.
Unfortunately, it was not until the passage of the Fair Housing Act of 1968 that the National Housing Act's discriminatory language was changed.
Overall, the National Housing Act of 1934 was beneficial in achieving the goal of making homeownership available to a wider public and stimulating economic recovery during difficult times. Despite exacerbating existing racial and social inequities, the Act provided an essential stepping stone for later housing reforms.