The Federal Housing Administration:

The Federal Housing Administration (FHA) plays a crucial role in the housing finance system by providing mortgage insurance to lenders. This insurance protects lenders against loss if a borrower defaults on their mortgage. By insuring loans, the FHA encourages lenders to offer loans to borrowers who might not qualify under conventional lending criteria, thus promoting homeownership among a broader range of individuals, including first-time homebuyers and those with lower credit scores.

When the FHA insures a loan, it reduces the risk for the lender, making it easier for them to extend credit. This has the effect of increasing access to financing for buyers who might otherwise struggle to obtain loans, thereby contributing to the stability of the housing market.

The other choices do not accurately describe the FHA's function. It does not make loans directly, as it does not lend money; instead, it provides insurance for loans made by lenders. It does not guarantee loans in the traditional sense but rather insures them, which is an important distinction. Securitization of loans is a process that involves bundling loans together to sell them as securities, which is handled by different entities and not by the FHA. Thus, the role of the FHA as an insurer is foundational to its operations and critical for supporting home financing