Despite the government shutdown, government-sponsored enterprises Fannie Mae and Freddie Mac are open for business.
What's more, the Federal Housing Administration (FHA)/U.S. Department of Housing and Urban Development (HUD) are still processing loans – albeit at a much slower pace – with a skeleton staff.
HUD had originally reported on Friday that it would not process applications in the event of a shutdown, however, it reversed that position over the weekend, after posting a revised contingency plan.
‘The HUD contingency plan posted on Friday mistakenly included incorrect information about a potential shutdown's impact on the FHA single-family loan program,’ HUD said in a statement on Monday. ‘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.’
HUD's Single-Family Housing division will continue to endorse new loans ‘in order to support the health and stability of the U.S. mortgage market,’ the agency said.
Still, there are serious questions as to whether the FHA and HUD will be able to handle the usual volume of loan applications. Of the 9,300 employees who work for HUD, only 350 (3.8%) will be able to work, according to the agency. What's more, the FHA processes about 60,000 loans per week.
Should the shutdown last longer than a week, it could result in a serious backlog of applications.
‘We don't expect the impact on the housing market to be significant, as long as the shutdown is brief,’ HUD said in its contingency plan. ‘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.’
Veterans Affairs loans will continue to be processed – however, HUD multifamily and USDA loans will not.
How much the shutdown impacts the housing recovery remains to be seen. Both lenders and servicers could face serious problems when processing applications, mainly because they will be unable to verify Social Security numbers and access Internal Revenue Service tax transcripts. These delays, in turn, could have a severe impact on the housing market over time.