The Federal Housing Administration in the New Millennium 371

The first challenge in attempting to predict the future of the Federal Housing Administration (FHA) is to understand why it is still here. No other depression-era mortgage-market institution has survived without substantial modification. We conclude that its survival has depended on its ability to invent new purposes for itself. For example, it changed from a replacement for failed prívate mortgage insur-ance using economic soundness asan insurance criterion toan innovator in high-risk lending based on an acceptable risk criterion. FHA has developed special programs to serve the needs of specific groups. We believe this pattern of change in purposes also is the key to FHA survival in the new millennium. We review potential future purposes for FHA and find that several-particularly, maintaining mort-gage credit flows in declining regional housing markets-will require a substantial FHA presence in mortgage markets. This is important because it implies that a marginalized FHA cannot serve severa! of the important purposes that it is likely to be asked to serve in the new millennium. Accordingly, we believe that FHA market share will be maintained and perhaps expanded in the new millennium, even with increasing competition from conventionallending