The Federal Housing Administration (FHA), an agency of the Department of Housing and Urban Development (HUD), insures private mortgage lenders against the possibility that a borrower will default on his or her mortgage. If the borrower does default, and the home goes to foreclosure, FHA will pay the lender the remaining principal amount owed on the mortgage. FHA insurance is intended to encourage lenders to offer affordable mortgages to certain eligible borrowers who might find it difficult to obtain a conventional (that is, non-government-insured) mortgage, such as households with small down payments. FHA requires a 3.5% down payment for most mortgages it insures, which is lower than the down payment required for most conventional mortgages. Through its single-family mortgage insurance program, FHA insures eligible mortgages used to purchase or refinance a single-family home. A lender must be approved by FHA to be eligible to offer FHA-insured mortgages, and borrowers and mortgages must meet certain underwriting and eligibility criteria to qualify for FHA insurance. Borrowers also pay fees, called premiums, in exchange for the insurance. FHA's single-family mortgage insurance program is intended to be self-supporting. The money that it brings in from the fees charged to borrowers and any amounts that it recoups from the sale of foreclosed homes is intended to cover the costs of any claims paid to lenders when mortgages default. However, in recent years increasing foreclosures on FHA-insured mortgages and factors such as house price declines have put pressure on the single-family mortgage insurance fund, known as the Mutual Mortgage Insurance Fund (MMI Fund). At the end of FY2013, FHA was required to take a $1.7 billion mandatory appropriation from Treasury to ensure that it would have sufficient funds to cover all of its expected future losses on the loans that it was currently insuring. FHA did not need any funds from Treasury for this purpose in FY2014. Furthermore, by statute, the MMI Fund is required to maintain a capital ratio of 2%. This means that it is supposed to have an economic value that is equal to at least 2% of the total dollar volume of mortgages that it is currently insuring, where the economic value is the current net assets of the MMI Fund plus the net present value of the estimated future cash flows on the mortgages that it currently insures. In other words, it is a measure of the amount of funds that would be expected to be available to cover any unexpected future losses on the loans that it currently insures, beyond what is needed to cover expected losses. The capital ratio fell below 2% in FY2009, and has remained below 2% since then, turning negative in FY2012 and FY2013. In FY2014, the capital ratio was once again positive, but at 0.41% remained below the 2% statutory requirement. FHA has made a number of policy changes in recent years to attempt to improve its financial condition. Congress has also been considering additional reforms to FHA. This report describes recent policy changes made by FHA and recent legislative proposals that would make additional changes to FHA's single-family program. For the most part, this report does not go into detail about the features of FHA-insured loans, FHA's market role, or its financial status, except as necessary to describe implemented or proposed policy changes. For more information on the features of FHA-insured loans and FHA's role in the mortgage market, see CRS Report RS20530, FHA-Insured Home Loans: An Overview , by [author name scrubbed]. For details on the financial status of the MMI Fund, see CRS Report R42875, FHA Single-Family Mortgage Insurance: Financial Status of the Mutual Mortgage Insurance Fund (MMI Fund) , by [author name scrubbed]. FHA has made several changes to its single-family insurance programs, particularly since FY2010, to attempt to improve its financial status. Recognizing that there is a tension between FHA's mission of expanding access to mortgage credit and its need to maintain the financial soundness of the MMI Fund, these changes generally attempt to improve FHA's financial soundness without unduly limiting access to mortgages for creditworthy borrowers. FHA has the authority to make some of these changes administratively, through policy guidance or rulemaking procedures, while others require congressional action. The policy changes that FHA has made in recent years generally attempt to increase FHA's cash reserves, to decrease the riskiness of the mortgages it insures, or both. Many of the changes that FHA has made or could make—including increasing premiums and strengthening underwriting criteria—impact the risk profile of future loans that FHA will insure rather than loans that FHA has already insured. FHA has fewer options at its disposal for making changes that will reduce its risk related to loans that it already insures. However, it has taken some steps that address past loans as well as future loans, such as more aggressively holding lenders accountable for loans they originated that did not meet FHA's criteria, making changes to its procedures for addressing delinquent mortgages (known as loss mitigation), and implementing new methods of selling foreclosed properties (known as property disposition). This section describes several major policy changes that FHA has proposed or implemented in recent years. The changes are divided into three broad categories: changes to eligibility and underwriting criteria (including changes to the premiums borrowers pay), changes intended to enhance FHA's oversight of lenders, and changes to the way in which FHA handles delinquent mortgages and foreclosed properties. Mortgages that FHA insures must meet certain underwriting standards and otherwise comply with FHA requirements. Some of the changes that FHA has initiated over the past several years involve increasing the premiums that borrowers pay for FHA-insured mortgages and strengthening the underwriting guidelines for its single-family program. The premium increases are intended to ensure that FHA is charging enough for its insurance to cover its potential costs, as well as to build up additional funds that can be used to pay for higher-than-expected losses on loans that FHA insures. The underwriting changes are aimed at making FHA-insured mortgages less likely to default, and therefore likely to result in fewer insurance claims that FHA has to pay. However, as a result of these underwriting and premium changes, some prospective homebuyers may find that they are no longer eligible for FHA insurance, or that FHA-insured mortgages are no longer an affordable option for them. Borrowers of FHA-insured mortgages pay both upfront and annual mortgage insurance premiums (MIPs). The upfront premium is paid when the loan is originated and is calculated as a percentage of the original loan amount. The annual premiums are paid each year and are calculated as a percentage of the outstanding loan amount. The premiums represent a large portion of the cash flow into FHA's single-family insurance fund. The maximum levels of both the upfront and annual mortgage insurance premiums are set in statute, but FHA can administratively set the actual premiums it charges, as long as it does not exceed the statutory maximum. In recent years, FHA has made a series of changes to the premiums it charges to new borrowers, increasing the premiums several times before announcing a decrease in the annual premiums in January 2015. Table 1 shows the current upfront and annual premiums charged by FHA compared to the maximum premium levels allowed by statute. The upfront premium that FHA is currently charging is 1.75% of the loan amount, compared to a maximum of 3% allowed by statute. The annual premium varies slightly depending on the initial loan-to-value ratio (LTV) of the mortgage. The annual premiums are currently 0.85% of the loan balance (or 0.80% of the loan balance if the initial LTV is 95% or less), compared to a maximum of 1.55% (or 1.50% if the initial LTV is 95% or less) allowed by statute. The current premiums are reduced from premiums of 1.35% and 1.30%, respectively, before the premium decrease in January 2015. These annual premiums are lower than any time since early October 2010, although they are higher than the premiums that were charged prior to that date. For the most part, the changes to the premiums have been made administratively by FHA, although Congress required an increase in the annual mortgage insurance premium of 10 basis points (one-tenth of one percent) in the Temporary Payroll Tax Cut Continuation Act of 2011 ( P.L. 112-78 ). Congress also passed legislation in 2010 raising the maximum statutory annual premium that FHA is allowed to charge, which allowed FHA to make subsequent increases to the annual premium. The changes to the premiums since October 1, 2008, are shown in Table 2 , along with their effective dates and the FHA administrative guidance (known as Mortgagee Letters) that implemented the changes. There has been much debate about the appropriate level for FHA's premiums. Prior to the reduction in the annual premiums in January 2015, several housing and mortgage industry and consumer groups had called on FHA to lower the premiums, arguing that the higher fees were making FHA-insured mortgages too expensive and may have been making it harder for some creditworthy borrowers to obtain FHA-insured loans. Those in favor of lowering the premiums also argue that setting the premiums too high could harm the FHA insurance fund by reducing the number of borrowers who obtain FHA mortgages (and thus pay fees to FHA) or by leading only riskier borrowers to seek FHA loans while less risky borrowers are able to obtain more affordable loans elsewhere. Other observers have been critical of the decision to lower premiums, particularly while FHA's capital ratio remains below the 2% level required by statute.