RealEstateEconomyWatch.com

Federal direct and guaranteed housing loan programs funded by the Federal Housing Administration are operating at a level after the federal government closed its doors and the US Department of Agriculture housing programs have shut down altogether

Some 350 of the 9,300 employees at HUD remain on the job and the Office of Single Family Housing is maintaining the minimum level of operations necessary to support FHA’s existing portfolio of loans, however most support services for the program, such as prequalification, approving lender applications and re-certifications, will cease.

Larger lenders who have been delegated authority to process FHA applications are unaffected by the shutdown, said Mike Copley, head of Retail Money-Out Products for TD Bank. Hre said borrowers who are in process of getting a loan as well as those who are getting ready to apply should have no hold-up due to the government shutdown. “Delegated lenders can make decisions and approve loans. The only problem borrowers might have is if they are working with a smaller lender who has not been delegated authority by FHA.

Jumbo loans might face a greater problem, he said. TD Bank requests a copy of applicants’ tax returns directly from the IRS to verify income. “We will go as far as we can go with jumbo applications in hopes that by the time we need to verify income the government will be up and running again.” said Copley, noting that the last government shutdown lasted only 21 days.

“Because we are able to endorse loans, we don’t expect the impact on the housing market to be significant, as long as the shutdown is brief. If the shutdown lasts and our commitment authority runs out, we do expect that potential homeowners will be impacted, as well as home sellers and the entire housing market. We could also see a decline in home sales during an extended shutdown period, reversing the trend toward a strengthening market that we’ve been experiencing,” states at FAQ on the HUD web site.

FHA is endorsing single family loan aplications during the shutdown. A limited number of FHA staff are available to underwrite and approve new loans but lenders will not be able to submit loans for approval if the loan is in pre-closing. However, FHA will continue to receive monthly mortgage insurance premiums and borrowers will be able to receive MIP refunds. FHA will not approve condo projects during a government shutdown.

HUD has an extremely limited number of employees to answer emergency questions during a shutdown. All 80 HUD field offices are closed with some limited exceptions for a very narrow range of activities that are permitted during a lapse in appropriations. “In most cases, if you call or email the field office or Headquarters staff, you will hear a voicemail or receive a return email indicating that the Government is closed,” says the FAQ.

The US Department of Agriculture has ceased making rural housing loans or guarantees, which will result in a setback in construction start-up, as well as a potentially costly inconvenience to buyers and sellers depending on a Single Family Housing loan or guaranteed loan. After shut-down operations, Rural Development state and area office employees located in communities throughout the United States will be furloughed within two business days.