We are on day 25 of the government shutdown, on January 12th it became the longest hiatus in U.S History, surpassing the previous shutdown of 16 days.  While over 800,000 employees are experiencing the effects and some states like Alaska who are getting the brunt of it.  While you may not be a government employee who is receiving the trickle down effects, you may be a homeowner, or potential soon-to-be homeowner that will.

How the Shutdown is Affecting the Mortgage Industry

Housing and Urban Development (HUD) and Federal Housing Administration (FHA)

The department of Housing and Urban Development (HUD) will continue to endorse FHA Mortgages until their authority runs out, in past shutdowns they have not been affected and have continued business as usual.  Fannie Mae / Freddie Mac are not government entities and will continue to secure mortgage backed securities as usual.  These authorities have a multi-year commitment to endorse and issue mortgages that was established well before this shutdown.  The only thing on halt for the FHA is the their condo approval process, existing approved condo projects and developments are safe though.

Veterans Administration (VA Loans)

The VA has continued to guarantee VA mortgages for veterans and their families.  While some mortgage companies have reported it slower while getting VA documents like Certificates of Eligibility.  Not much has changed in this.  We can expect a continuance without difficulty for VA loans.

Fannie Mae / Freddie Mac (Conventional Loans)

Conventional loans are bought and sold by a different market that isn’t affiliated with the government.  While they are regulated, they are not directly endorsed by the federal government.  Therefore conventional loans have had little slow down from the government shut down.  It’s unlikely that they will see any consequence in the future from a continued shutdown. (as long as it doesn’t last too long)

United States Department of Agriculture (USDA Loans)

USDA loans have been the only loan we’ve seen affected.  Which is fortunate as they only account for a small percentage of total loan volume.  While the USDA will stop their guarantees of these loans, our lenders are continuing to issue and close them in anticipation that the USDA will be back to work issuing commitments soon.

Ways the Shutdown Will Affect Mortgages

Although loan production has not seen any real decline, it has seen some minimal cause and affect.  There are certain government agencies that participate in every loan closing.  Things like Tax transcripts are ordered through the IRS, and have been more difficult to obtain.  Other government services like social security verification can also be slowed down, but it certainly isn’t stopped at this point.

Prolonged Shutdown Will Affect the Real Estate Market

Although the immediate effects of the shutdown are not stagnating the market, a prolonged one will.  It’s safe to say that the longer the shutdown goes the more government agencies will be influenced.  There are certain Loan options that will see detriment before others, but all will be affected if we see this go on for a long period of time.  A halt in mortgage production will result in a decline in real estate purchasing and refinancing, which will ultimately direct us towards economic decline.  The housing market is a large portion of our nations economic backbone, and the government will likely not let a shutdown put us into another 2008/2009.

 

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Justin Scott

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Executive Mortgage

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Green Bay WI 54301