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The Department of Housing and Urban Development (HUD) is responsible for insuring Federal Housing Administration (FHA) loans. The FHA, which is part of HUD, was created to help individuals who may have lower income or less-than-perfect credit secure home loans. By insuring these loans, HUD provides lenders with the assurance that in the event of default, the government will cover a significant portion of the loss. This insurance allows lenders to offer better terms and lower down payments to borrowers, thus promoting home ownership.

Fannie Mae and Freddie Mac, while important in the secondary mortgage market, do not insure FHA loans. They primarily operate by buying loans from lenders, thereby providing liquidity and ensuring that more funds are available for housing. The Federal Deposit Insurance Corporation (FDIC) focuses on protecting deposits in banks and does not have a role in insuring FHA loans.