The morning of October 1st came without the passage of a new budget proposal for the government. Given that Americans have not seen a shutdown of the government in nearly eighteen years, many are wondering what to expect during this time for real estate – especially considering that 90% of all home loans in the United States are either insured, underwritten or outright owned by the federal government and the agencies and entities associated with it.
We cannot comment on those seeking to renew their passports, but single-families seeking a home loan can rest assured that their loan applications will continue to be processed. This development is promising, considering 30% of all home mortgages are underwritten by the FHA and VA. The Department of Housing and Urban Development has said that despite substantial furloughs, loans will continue to be processed, though some delays can be expected.
Fannie Mae and Freddie Mac have likewise issued assurances that they will continue operating during the shutdown. Given that these companies have other sources of income, it is unlikely that either will be affected by the shutdown.
How Will the Shutdown Affect FHA Processing?
It is almost inevitable that the rate of loan processing will slow, though by how much depends on how long the shutdown lasts. If a new budget is passed within the next few days, delays will likely be minimal. If the shutdown lasts longer than a few days, however, more earnest complications could arise.
Furthermore, the agency will probably employ a smaller, limited number of employees to process single-family loans for the time being.
For a more detailed description of the shutdown’s impact on the Federal Housing Administration, click here.
How Will the Real Estate Recovery be Affected?
No one knows for sure how real estate will be impacted due to the government shutdown, but there is cause for concern: real estate has been a bright spot over the past couple of years and anything to slow its progress would be counterproductive.
There is some precedent; the latest shutdown was in 1995-1996. During that time, the VA experienced delays in processing certificates of eligibility and other key documents.
Also, many single-family home loans backed by the FHA are a part of multi-year appropriations, which wouldn’t be impacted by a relatively-short shutdown.
Simply put, homeowners looking to the federal government for help in buying a home can rest assured that help will still be there for the time being, until a resolution is reached.