The US federal government enters day three of a total shutdown, forcing many programs and agencies to suspend operations — including mortgage processing.
It is estimated that some 3,500 federally backed mortgages are going unprocessed daily as the shutdown ensues. That’s according to a new report by the listing site Zillow.
Homebuyers with loans from the US Department of Veteran Affairs (VA), the Federal Housing Administration (FHA) and the Rural Housing Service (RHS) are affected because federal employees that process loans from these agencies are involved in the shutdown.
As such, unless funds are released to those agencies, any applications still in process are likely will remain in limbo until the shutdown ends.
However, VA, FHA and RHS loans makeup a small fraction of overall mortgage loans, but the estimated dollar value of the mortgages in limbo is estimated to be over $700 million, Zillow tells BuzzBuzzNews. The bulk of government sponsored loans, roughly about two-thirds, originate from Freddie Mac and Fannie Mae, but since those entities operate outside of the government, their employees are not federal workers and unaffected by the shutdown.
Some renters are also likely to be impacted by the shutdown, but there is no data currently available as to the effect of the shutdown on renters who may be receiving federal funds to subsidize portions of their housing costs.
“Vouchers needed to pay January rent have already very likely been funded, and those needed to pay February rent would come into play only if the shutdown were to last more than a week,” Zillow says.
Additionally, it’s safe to assume that the shutdown is having an indirect impact on the housing market as well, with consumers not feeling confident about homebuying during the shutdown.
“Buying a home is a huge leap of faith for many, as they bet on continued job security and steady income to finance their homes. A government shutdown, even for a short time, means workers get furloughed and checks aren’t written, which may cause many would-be buyers could get cold feet,” Zillow says in the digital release.
And, the longer the shutdown continues, the more pronounced the effect on consumers could be.
The government shutdown in October 2013 lasted a total of 12 business days. Should the current shutdown drag on to similar length, potentially 42,000 mortgages from being processed, according to Zillow.
Click here to read the entire report.