• The U.S. government insures some home loans.federal reserve seal image by jimcox40 from Fotolia.com
  
  The Department of Housing and Urban Development (HUD) is the federal government's administration for fair housing and homeownership. Part of this department is the Federal Housing Administration (FHA). While the government is not a direct lender, the FHA reviews private lenders and approves those who meet certain standards of lending. These lenders are then empowered to make FHA-insured loans. There are some laws governing these loans.
  
  

Private Mortgage Insurance

• Private mortgage insurance, commonly known as PMI, is a common fee on FHA-insured home loans. The federal government will not insure very risky home loans without some protection. Therefore, the FHA mandates PMI for all home loans made to borrowers whose homes have a loan to value greater than 80 percent. To calculate PMI, the lender simply divides the mortgage balance by the value of the home and multiplies by 100. For example, if a borrower is putting $10,000 down on a home he is purchasing for $200,000, his resulting mortgage balance will be $190,000. Therefore he must carry PMI on his FHA loan since his loan to value is 95 percent.
  
  

Full Appraisal

• FHA home loan lenders have some leeway when making loans to private borrowers, but when it comes to home value, these lenders must follow the FHA lending law. This means that any new mortgage loan application cannot be approved without an FHA-approved appraiser conducting a full, unbiased property report. The 2008 credit crisis was precipitated in part by unethical lenders inflating home values to make larger home loans. FHA appraisers are trained to make honest judgements about a property's value in the context of the housing market and the neighborhood.
  
  

Service Members Civil Relief Act

• The Service Members Civil Relief Act, passed the 1940s, was designed to give financial relief to members of the U.S. armed services. One of these provisions is mortgage interest relief. All FHA lenders are required to comply with this policy. For example, if an FHA borrower is about to head out on active duty and requests an interest rate reduction, lenders must immediately send this request to the Department of Veterans Affairs and the FHA. Once the active deployment is verified, the mortgage interest rate must be no higher than 6 percent per year.