FHA to Feel Effects from U.S. Government Shutdown
Despite prior reports to the contrary, the Federal Housing Administration will not stop processing loan applications as a result of the government shutdown that began earlier this week. Instead, the U.S. Department of Housing and Urban Development (HUD)’s Office of Single Family Housing will continue to endorse new loans “in order to support the health and stability of the U.S. mortgage market,” according to its latest contingency plan.
“The single-family aspect of FHA is funded through multiyear appropriations,” a HUD spokesman told Inman News. Therefore, while there will be some reductions in staff and furloughs, that part of the FHA will be able to operate, albeit “at a slower pace,” he said.
FHA’s multifamily operations, on the other hand, are funded on a year-by-year basis, and therefore “while FHA will be able to endorse new mortgages, it will not be able to underwrite them.” No condo projects would be approved during a shutdown. HUD has yet to determine how much of a delay single-family loan applications will suffer or what the exact long-term impacts of an extended shutdown could be, the spokesman said.
“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,” 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.”
The staff of HUD’s Office of Housing will be severely pared down in the event of a shutdown, from 2,972 workers today to 68. This skeleton crew will be in charge of administering FHA’s portfolio of loans, including underwriting and approving new loans, collecting premiums, paying claims and responding to questions, as well as handling HUD’s rental assistance programs. FHA’s underwriting program, Total Scorecard, will be available, so lenders will be able to close loans.
Furthermore, HUD said lenders will be able to obtain FHA case numbers from FHA Connection, but that other systems that interface with FHA Connection ”may not be available, or if available these other systems may not be fully supported so FHA Connection processes may not be fully functional. At this time we do not have complete information on the potential impact on some FHA Connection functionality.”
NAR has prepared an overview of the government shutdown and how it impacts REALTORS® to hopefully answer any concerns you may have.