What does FHA stand for in mortgage lending?

The correct answer is that FHA stands for the Federal Housing Administration. This agency, established in 1934, is part of the U.S. Department of Housing and Urban Development (HUD) and plays a crucial role in the mortgage lending process. The FHA insures loans made by approved lenders to borrowers with low to moderate incomes. This insurance protects lenders from loss in case borrowers default on their loans, which encourages lenders to offer these mortgages to individuals who might have lower credit scores or smaller down payments.

By providing such insurance, the FHA helps to promote homeownership among a broader segment of the population, allowing more families to access financing options that they might not otherwise qualify for without the assistance of such an agency. This has a significant impact on the housing market and supports economic stability.

The other options do not correctly describe the agency's name or function. For instance, the Federal Housing Authority is a common misnomer and does not exist as a separate entity. The term "Fixed Housing Adjustment" and "Federal Home Assistance" do not accurately reflect any recognized agency or program within the context of mortgage lending and thus are not valid interpretations of the acronym FHA.