Federal layoffs may soon come for America’s largest mortgage insurer, a powerful engine of the country’s housing market.
On Tuesday, Bloomberg reported that President Donald Trump’s administration plans to lay off at least 40% of the workers at the Federal Housing Administration (FHA). However, a government spokesperson denied plans to lay off such a significant portion of the FHA’s workforce.
“Suggestions FHA will cut about half its workforce are not accurate,” a spokesperson from the US Department of Housing and Urban Development (HUD), which oversees the FHA, told CNN.
The spokesperson did not confirm or deny that layoffs were coming to the department, though.
Last week, newly confirmed HUD Secretary Scott Turner announced that the agency would launch a US Department of Government Efficiency (DOGE) task force.
“Thanks to President Trump’s leadership, we are no longer in a business-as-usual posture and the DOGE task force will play a critical role in helping to identify and eliminate waste, fraud and abuse and ultimately better serve the American people,” Turner said in a statement on Thursday.
Thousands of government employees have already been fired or placed on administrative leave by DOGE, a Trump administration initiative designed to root out wasteful spending led by billionaire Elon Musk. However, the FHA primarily operates from self-generated income, according to HUD’s website.
Layoffs at FHA could potentially slow down the agency’s work, which includes providing over $1.3 trillion in mortgage insurance for single-family homes, multifamily properties and health care facilities.
What is the Federal Housing Administration?
Since its creation by Congress in 1934, the FHA has played a key role in kick-starting the growth of American homeownership.
At the time of its founding, during the Great Depression, America was primarily a nation of renters, with only 1 in 10 households owning their own home, according to HUD’s website. Back then, most down payments were set at 50%, making homeownership unaffordable for many Americans.
Today, the FHA has grown to be one of the largest mortgage insurers in the world, actively insuring over 8 million single-family mortgages and thousands of mortgages for multifamily properties and health care facilities.
Amid nationwide housing affordability challenges and mortgage rates that hover around 7%, the FHA has played a key role in promoting affordable and relatively easy-to-qualify home loans for first-time and low-income homebuyers who otherwise may have struggled to enter the housing market.
Over 80% of FHA borrowers are first-time homebuyers, and the average home purchased with FHA-insured mortgages is about half the price of the national median home.
The FHA does not directly lend anyone money to buy a home. Instead, the loan is issued by a bank or other financial institution that has been approved by the FHA. This makes it easier for many homebuyers to get approval for bank loans, since the federal government, not the bank, is the one bearing the default risk.
The minimum downpayment required for an FHA home loan is 3.5% if you have a credit score of 580 or higher. Those with lower credit scores may qualify for loans requiring a 10% downpayment.
FHA loans come with required mortgage insurance, which lowers the risk for lenders to make the loan. Though it can add to a borrower’s costs, it helps those homebuyers who may not be able to qualify for a home loan another way.
