In an effort to increase efficiency, the Trump administration has dismantled or made staff cuts at more than 25 agencies, including a proposal to layoff at least 40 percent of employees at the Federal Housing Administration (FHA). A large reduction in the FHA’s staff would negatively affect homebuying opportunity, would endanger lender stability, and could depress local economies, as the agency would have less ability to insure borrowers and mortgage lenders, thus increasing the likelihood of foreclosure and severe losses. These effects would be felt nationwide, as the FHA made loans in every congressional district in the country, save for one, in 2023.
The FHA is one of the few policy levers available to the federal government that can make homeownership accessible and affordable at scale. Already, the FHA is self-sustaining by funding its own losses through fees charged to borrowers, and it even makes money for the federal government. According to the Office of Management and Budget, the FHA generates an average estimated profit of 202 basis points in interest per loan.
The FHA—and other housing programs—play an important role in keeping housing affordable for communities across this country. Although the FHA could be more efficient, sharp staffing cuts will undermine existing agency efficiency and push homeownership into turmoil at a time when the country is experiencing a severe housing crisis.
Who does the FHA serve?
Using data from the Home Mortgage Disclosure Act and ICE Mortgage Technology, we calculated FHA total loan counts and loan performance by census tract and then used population weights to estimate these data at the congressional district level. Our analysis finds that in 2023, the FHA made loans in every single congressional district in the country except for one, with the share of mortgage originations nationwide increasing from 16.5 percent to 25.8 percent between 2021 and 2024. Areas with modest home prices and more residents with low incomes tend to be the most reliant on FHA lending, with FHA lending exceeding 40 percent of total mortgages in seven congressional districts.
The share of FHA lending varies based on demographic and market characteristics. In districts with many households with annual incomes below $50,000, FHA loans tend to make up a greater share of total lending. More people with low incomes rely on FHA mortgages because the FHA makes loans more easily available to first-time homebuyers, borrowers with lower credit scores, and borrowers who can afford only low down payments. FHA lending is a key path to homeownership for households without family wealth and plays a critical role in the financial health of low-income communities, as homeownership drives economic growth, property values, and tax revenue.
The share of FHA-backed loans is also higher in communities with lower home prices. There is already a very small—and shrinking—stock of affordable owner-occupied housing, so diminishing the FHA’s capacity to back loans in more affordable communities will make homeownership less attainable for households with less wealth.
Our analysis also finds that the FHA tends to drive a greater share of total lending in less dense areas, including suburban and rural communities.
How does FHA lending vary by congressional representation?
FHA lending drives opportunities in housing markets across the country, affecting districts led by Republicans and Democrats alike. Of the 100 congressional districts with the highest shares of FHA loans in 2023, 51 had a Republican representative and 49 had a Democratic representative.
The five congressional districts with the highest share of FHA first-lien mortgages in 2023 were as follows:
- Florida’s 18th District (Republican representative): 46.8 percent
- California’s 22nd District (Republican representative): 45.8 percent
- Illinois’s 2nd District (Democratic representative): 43.5 percent
- Texas’s 34th District (Democratic representative): 41.7 percent
- California’s 23rd District (Republican representative): 41.3 percent
The FHA’s role extends beyond mortgage making. The agency also ensures that lenders are repaid. If the FHA reduces its staff, the agency’s ability to help lenders and servicers manage loans is likely to be diminished, which could hit hardest in the same areas where FHA loans are most prevalent.
The FHA’s loss mitigation policies prevented hundreds of thousands of foreclosures during and after the COVID-19 pandemic. The FHA is in the strongest financial condition it has been in decades, with a loss reserve cushion that is more than five times (PDF) the congressionally mandated level. Although the FHA support strategies for delinquent borrowers do require an expenditure, the cost is far lower than the bill taxpayers foot for a foreclosure. If the FHA’s systems and specialized servicing staff are suddenly disabled, the increase in foreclosures would hurt the entire economy but especially the communities with more FHA loans.
Nationally, 4.4 percent of FHA loans are seriously delinquent, well below the 7.6 percent average from 2008 to 2010 during the foreclosure crisis. In fact, today’s serious delinquency rate aligns with that of prior periods of market stability, such as 2016 to 2019. Cutting the FHA’s staff and servicing abilities could undermine that stability nationwide.
The housing markets most likely to be affected by the disabling of effective loss mitigation strategies are those with relatively high rates of active FHA mortgages that are seriously delinquent. The five congressional districts with the highest 2024 rates are as follows:
- Illinois’s 2nd District (Republican representative): 3.9 percent
- Louisiana’s 6th District (Democratic representative): 2.4 percent
- Florida’s 18th District (Republican representative): 2.4 percent
- Louisiana’s 2nd District (Democratic representative): 2.1 percent
- Texas’s 29th District (Democratic representative): 2.0 percent
What’s at stake?
As we saw during the 2008 foreclosure crisis, high concentrations of foreclosures can depreciate property values among neighboring homes, with worsening effects if foreclosed properties sit vacant for a long time (PDF). FHA staffing cuts could lead communities to experience higher rates of home loss, which would harm borrowers and increase losses to taxpayers.
Further, FHA-backed originations could fall as lenders regularly rely on the National Servicing Center during the originations process. A drop in FHA originations will especially hurt people and local economies in the congressional districts where the FHA insures a significant share of mortgages. Also, FHA layoffs could hamstring FHA-backed multifamily loans and loans for the construction, acquisition, and rehabilitation of senior living and hospital facilities. Any slowdown in these areas would worsen the already severe housing supply crisis and its effects on the growing population of older adults.
What could policymakers interested in increasing efficiency do instead?
Policymakers have plenty of tools to make the FHA more efficient and nimble. Investing in the FHA’s systems to continue automating procedures would allow the agency to reduce the labor and time intensity of their work, which eventually might mean that the FHA needs fewer staff.
Reducing the FHA’s staff abruptly without significant prior investments in technology, information gathering, and planning will affect every part of the housing market—young people, older adults, financial institutions, communities in all congressional districts, and the national economy.
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