We are in day two of the government shutdown with lots of people weighing in on the impact of the shutdown on the real estate market.
First let’s review some specifics.
Fannie and Freddie: Mortgages purchased and secured by Fannie Mae and Freddie Mac will not be affected by the shutdown because their money for operations comes from the fees they charge the lenders.
FHA: FHA loans will still be processed (their funding comes from multi-year appropriations and are not affected), but there will be delays as their staff is now less than a tenth of the normal size.
VA: VA loans will also continue to be processed (funds are received from fees paid by users), but like FHA, there will be delays.
So now let’s take a look at what people are saying.
According to Natalie Pace of HuffingtonPost.com, here’s a question she posed Lawrence Yun, the chief economist for the National Association of Realtors:
“Natalie Pace: Will the government shutdown affect the real estate recovery? If so, how?
Dr. Lawrence Yun: Not much impact in terms [of] mortgage loan availability. Most mortgages will be processed as before because Fannie and Freddie will remain open. FHA loans are to be processed as well. The only negative is from a prolonged shutdown, which impacts consumer confidence negatively.”
According to David Stevens, chief executive officer of the Mortgage Bankers Association (and former head of the FHA), he spoke to Forbes and said:
“The last thing we need is anything that shakes the confidence in a softly recovering housing market. If it’s a short-term shutdown, it’s a story about these employees put out of work. If it’s long term, it’s a broader story about the adverse impact to the economic recovery.”
And, according to Don Fommeyer, president of the National Association of Mortgage Brokers and vice president at Amtrust Mortgage Funding:
“The government doesn’t generally approve loans, they basically just insure them. For the most part you aren’t going to see much of a hit in the mortgage market unless it [the government shutdown] goes for a long period of time.”
Fommeyer also said (as quoted by Forbes):
“If it does stretch on, he adds, the worry will be what mortgage rates do in a market shrouded in fiscal uncertainty and how that will affect the home buying, especially in light of recent rate spikes.”
So where are we headed? Only time will tell. Let’s hope we get out of this newest disaster soon!