Which statement is true regarding the FHA?

The statement that the FHA does not lend money is correct because the Federal Housing Administration (FHA) is not a lender itself. Instead, its primary role is to provide mortgage insurance on loans made by approved lenders. This insurance protects lenders against the risk of default by borrowers. By doing so, the FHA enables lenders to offer loans to borrowers who might not qualify for conventional financing due to lower credit scores or smaller down payments.

This insurance mechanism allows for increased access to homeownership, particularly for first-time buyers or those with limited financial resources. The FHA establishes guidelines that lenders must follow in order to qualify for this insurance, but it does not directly engage in the act of lending funds. As a result, the FHA plays a crucial role in shaping mortgage lending practices in the United States without actually being a lender itself.