Which agency is responsible for insuring mortgage loans?

The Federal Housing Administration (FHA) plays a pivotal role in insuring mortgage loans in order to promote homeownership by making housing more accessible. By providing mortgage insurance on loans made by approved lenders, the FHA mitigates the risk to lenders, which incentivizes them to lend to borrowers who may have lower credit scores or smaller down payments. This insurance allows for greater accessibility to home financing, which can be particularly beneficial for first-time homebuyers or those with less financial stability.

The other agencies listed have different primary functions. The Department of Veterans Affairs (VA) provides guarantees for loans made to veterans and active-duty service members, rather than outright insurance like the FHA. The Department of Housing and Urban Development (HUD) is the parent agency of the FHA and oversees federal housing programs but does not directly insure loans itself. The Internal Revenue Service (IRS) is primarily concerned with tax collection and administration, not with mortgage loans or housing assistance. Thus, the FHA is correctly identified as the agency that insures mortgage loans, promoting a more inclusive home financing environment.