What is the FHA?

The Federal Housing Administration (FHA) is indeed an agency of the United States Department of Housing and Urban Development (HUD). Established in 1934, its primary purpose is to facilitate access to home financing for low-to-moderate-income borrowers by insuring loans made by approved lenders. This insurance helps reduce the risk for lenders, encouraging them to provide loans with more favorable terms, such as lower down payments and less stringent credit requirements.

While the FHA does involve loans, it does not directly provide funding or personal loans to individuals; rather, it works by providing insurance to lenders. This is why options focused on loan provision or guarantees (like being a loan provider or a guarantor) do not accurately describe the FHA's role. The concept of providing interest-free loans is not part of the FHA’s offerings either, as the FHA-insured loans typically involve interest charged by the lender. Therefore, the primary identity of the FHA as a governmental agency dedicated to promoting home ownership and financial assistance makes option A the correct choice.