10/1/2013 2:15 PM ET|
Shutdown could bruise housing recovery
One of the biggest questions regarding the shutdown and how it will affect housing has revolved around the mortgage market, specifically prospective buyers' access to new home loans.
The government shutdown is here. Whether it's not being able to get a new Social Security card or visit a national park, Americans will immediately feel the effects. But there's one bright spot of the economy that stands to be affected as well: housing.
One of the biggest questions regarding the shutdown and how it will affect housing has revolved around the mortgage market, specifically prospective buyers' access to new home loans. After all, more than 90% of all loan activity is underwritten, insured, or owned by the government and its affiliated entities.
Initially at least, the mortgage market is likely to be only minimally impacted. New loans will continue to push through most government agency pipelines. What will change is how long the process takes, as many agencies expect to experience delays.
Mortgages purchased and securitized by Fannie Mae Fannie Mae and Freddie Mac Freddie Mac will be unaffected because their operations are paid for by fees charged to lenders. And the Department of Veterans Affairs will continue to guarantee mortgages for Americans that have served in the military since these loans are funded by user fees as well.
But if the government shutdown of 1995-1996 is any indicator, the process will take longer than usual. "Loan Guaranty certificates of eligibility and certificates of reasonable value were delayed," the VA warned in its September 25th contingency plan.
Where there has been mounting concern is the Federal Housing Administration, which currently endorses about 15% of the entire single-family mortgage market. Several media outlets recently reported that the FHA would be unable to endorse any single-family loans and that no staff would be available underwrite and approve new loans.
That prospect would be somewhat worrisome -- if it were actually true. The FHA's Office of Single Family Housing will indeed remain open for business, albeit with a smaller staff. "FHA will be able to endorse single family loans during the shutdown. A limited number of FHA staff will be available to underwrite and approve new loans," the report now states. In other words, other lenders' loans will continue to be insured and some in-house lending will continue to take place at a reduced rate.
The reason for that mix-up: the initial draft of the U.S. Department of Housing and Urban Development's contingency plan mistakenly stated that single-family loan operations would cease. The report was amended over the weekend.
The FHA's single-family loan operations are funded through multi-year appropriations, meaning their budget is not tied to the government's standoff over funding for the new fiscal year that starts in October. On the other hand, what will be more affected is the agency's Multifamily Housing Office, which is funded through yearly appropriations.
"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," continues the HUD report. "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."
One government lender that will indeed suspend its home loan activity, however, is the Department of Agriculture. The USDA says that no new housing loans or guarantees will be issued through its Rural Development programs in a shutdown. The department also warns that such a scenario could cause "a setback in construction start-up," and if the shutdown lasts for an extended period, "a substantial reduction in housing available in rural areas relative to population."
"The government doesn't generally approve loans, they basically just insure them," says Don Frommeyer, president of the National Association of Mortgage Brokers and a vice president at Amtrust Mortgage Funding. "For the most part you aren't going to see much of a hit in the mortgage market unless it goes for a long period of time."
More from Forbes
VIDEO ON MSN MONEY
THE BATTLING BOYS OF BENGHAZI??
We're the battling boys of Benghazi
No fame, no glory, no paparazzi.
Just a fiery death in a blazing hell
Defending our country we loved so well.
It wasn't our job, but we answered the call,
fought to the Consulate and scaled the wall.
We pulled twenty countrymen from the jaws of fate
Led them to safety, and stood at the gate.
Just the two of us, and foes by the score,
But we stood fast to bar the door.
Three calls for reinforcement, but all were denied,
So we fought, and we fought, and we fought till we died.
We gave our all for our Uncle Sam,
But barack obama didn't give a damn.
Just two dead SEALS who carried the load.
No thanks to us.........we were just
"Bumps In The Road".
Please circulate this email....please keep it going so it will reach every American with a
computer. Something has to be done with the incompetent people who literally sat
there in the White House and watched the Seals execution on live streaming video
and did absolutely nothing. The Obama Administration, including former Secretary of
State Clinton, must be held accountable and that will not happen unless ALL of US demand it.
I blame the democrats and other vile, liberal vermin for this government shutdown and a potential interruption of the housing recovery.
The ACA is a costly venture for both individuals, businesses and the government.
Postpone the individual mandate until enough people can actually go onto the online exchanges and price out a policy. Then they will see that Obamacare is nothing more than a clip joint.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The stock market finished the Wednesday session on an upbeat note with the Nasdaq (+1.3%) ending in the lead. The S&P 500 settled higher by 1.1% with all ten sectors posting gains.
The benchmark index spent the entire trading day in the green, rallying to new highs during the last hour of action. The tech-heavy Nasdaq, meanwhile, briefly dipped into the red during morning action, but was able to recover swiftly.
Stocks began the trading day with modest gains ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'