ShmoopTube

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Finance a la shmoop what is the Federal Housing Authority or FHA? alright so

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before 1934 a whole bunch of homes were doing this leaving a whole bunch of [Home crumbles to the ground]

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people well doing this then along came the National Housing Act of 1934 thank

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you FDR which created the FHA which served to stabilize the process of

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building and buying homes and you can imagine that Home Building is a big fat [A house of cards appears]

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house of cards when it's not well-managed shoddy workmanship allows

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homes to fail in the first breath of wind the wolves out there so that

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insurance companies are loathe to pay when they fall and so banks then are

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loathe to lend money to would-be home builders and buyers and would you

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believe it before the FHA normal home loans were only three to five years like

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you'd borrow at today's dollars say 200 grand to buy a home and you'd be

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expected to pay it all off in just a few years yeah the greatest generation they

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were tougher than we are today they could actually do that so who could

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afford to buy a home yeah pretty much nobody, nobody but the rich already rich

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yeah so nobody then in that environment does a whole lot of nothing and a lot of [Man discussing home buyers]

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people were very homeless and very unhappy and if you think about the way

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wealth has been created in this country a lot of it's been through or even most [Young man and woman taking down a for sale sign]

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of it's been through homeownership so in those days people really didn't have the

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opportunity it was not a fair world well the FHA set basic standards that

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serve to improve building and housing conditions so that everyone wasn't

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susceptible to you know the big bad wolves huffing and puffing and a home as [Wolf walks past house and blows it down]

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long as it wasn't made of straw actually had a chance of staying intact for a few

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years and this was possible this was not high-tech look at Europe the homes they

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have there or three four five hundred years old built out of brick Union labor

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or non-union labor I guess with the king and they're doing just fine so go Europe! [Man holds up EU flag]

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yeah you have to win one every now and then and now the typical home loan in

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America anyway is about 30 years rather than three to five giving everyone ample

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opportunity to pay hundreds of thousands of dollars in interest over the course

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of repayment and the FHA sprays WD-40 on the tracks [Peron sprays WD-40 on train tracks]

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of the banks you know who are then a lot more willing to loan that money and make

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a whole lot more money for themselves thank you American capitalist system so

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yeah thank goodness auto-pay came around so that you don't have to feel pain

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every month when you write that mortgage check you know just ask everyone who

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owns a home feels it and we feel your pain

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