The Government Shutdown And Housing

By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.

We're a little over a week into the government shutdown and many are wondering whether the closing of federal offices has or will impact the housing market.

The short answer at this point is no. But since none of us can predict how long this may last or what the outcome may be, it's hard to say with certainty that no glitches will arise.

Fannie Mae and Freddie Mac back the majority of mortgages in the U.S., and thus far have not been affected by the shutdown. However, the Federal Housing Administration is operating with a reduced staff, which means that FHA loans may experience delays in processing due to the lack of staff.

In fact, news sources say that the Department of Housing and Urban Development, which oversees the FHA, has just 64 of the nearly 3,000 employees who normally work at its offices reporting to work right now.

What could create delays in the mortgage market is the lack of an IRS form that lenders use to verify borrowers' incomes. Since the IRS is closed as part of the shutdown, they're not releasing verification forms at the moment. While a portion of the loans in process now would already have ordered these forms, some may be waiting for this in order to resume closing. If the shutdown lasts for more than a week or two we could reach a point where a small backlog occurs.

A few buyers are already caught up in mortgage purgatory because of the shutdown. If the shutdown persists, there will come a point where no mortgages can move forward. And those who were seeking FHA loans likely would be out of luck.

However, as the Wall Street Journal points out, if the shutdown lasts longer than a week or two, income verification forms would be the least of anyone's worries. Some government employees may face falling late on their mortgage payments. FHA could lose funding authority, effectively shutting off all FHA-backed loans. And failing to raise the debt ceiling would have much broader consequences for the housing market and the economy than process delays.

At this point, it's all speculation around what happens to the housing market and greater economy if the shutdown affects the debt ceiling. But we're all watching nonetheless.

If Congress resumes in the next week, home sales likely will be unaffected in the grand scheme of things.

Let's hope for the best.