Congress Launched Pilot for Small-Dollar Mortgages
The four-year program aims to boost lending options for smaller home loans across the United States.
Updated on Oct. 7, 2026 in Residential
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Should the government provide financial incentives to encourage banks to issue small-dollar home loans?
Congress has established a four-year pilot program to encourage small-dollar mortgage lending. The initiative, overseen by the Federal Housing Administration, seeks to address the shrinking availability of loans under $100,000.
Why it matters
Lenders have historically hesitated to issue small-dollar loans due to perceived costs and market frictions. This program attempts to increase participation by providing direct payments and assistance with closing costs.
Small mortgages under $100,000 accounted for just 2.3% of originations in 2026, a decline from 3.1% in 2024. Iowa currently holds the largest state share for these loans at 9.6%.
The players
Federal Housing Administration
This federal agency is responsible for overseeing the new pilot program designed to increase the prevalence of small-dollar mortgage lending.
Consumer Financial Protection Bureau
This agency will conduct research into the effects of loan originator compensation and fees on the small-dollar mortgage market.
The details
The program provides direct payments to lenders, assists with closing costs, and includes provisions to adjust loan terms to make small-dollar financing more viable. Additionally, the Consumer Financial Protection Bureau is tasked with studying how lender compensation and fee structures influence the availability of these specific mortgage products.
Timeline
In 2013, the small-mortgage share was 12.9 percent.
In 2016, the small-mortgage share was 9.9 percent.
In 2023, banks originated 35 percent of mortgages.
In 2026, the small-mortgage share dropped to 2.3 percent.
The pilot program will operate over a four-year period.
Roadmap
The introduction of this pilot program marks a federal effort to counteract a decade-long decline in small-dollar home lending. It positions government policy as a direct intervention against the industry trend of prioritizing larger, more profitable loans over smaller home purchases.
Prospective buyers seeking homes under $100,000 may find more accessible loan terms as lenders receive incentives to participate in this program. These changes could reduce the financial burden of closing costs for those entering the market at a lower price point.
The takeaway
Small-dollar mortgage availability has dropped significantly over the last decade, falling from 12.9% in 2013 to 2.3% today. Consumers should watch for new, lender-specific programs that may arise as a result of federal incentives for these smaller loans.
Further reading
For additional context on home lending trends, visit the Residential section.
Live Poll
Should the government provide financial incentives to encourage banks to issue small-dollar home loans?
