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What a Government Shutdown Means to Real Estate

By
Real Estate Agent with Keller Williams Shore Properties 1005238

Mortgage Pic

Banks rely on the government to keep mortgage business flowing. The Federal Housing Administration, which had a hand in about 40 percent of new mortgage loans in 2010, will stop guaranteeing loans to borrowers.

A government shutdown will curb mortgage processing at some large banks, especially if the government goes down an extended period of time.

An FHA spokesman said that if the government does shut down it "will not be able to endorse any single-family loans, and staff will not be available to underwrite and approve new loans."

Several banks are beginning to plan on how to handle their mortgage business in the event of a government shutdown. Bank of America Home Loans will continue originating and closing FHA and VA mortgages in the event of a short-term shutdown of the federal government.

JPMorgan says that it will not be able to originate new home loans, but will close mortgages that have already been approved by the FHA.  Wells Fargo says that the bank will be able to take applications and continue FHA loans "in most situations." There may be circumstances that require the FHA to sign off on loans and in this case these loans will be delayed. (compiled from multiple sources)

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Comments (8)

Nita Shinsky
Shinsky & Assoc - Azle, TX
Broker, GRI, SFR, e-Pro

Thanks for the blog. I was just talking with a guy in the military that was concerned with his job. It is amazing just how bad things are in the White House that this is even an issue.

Apr 08, 2011 08:27 AM
Karl Hess
Keller Williams Shore Properties - Barnegat, NJ
on The Jersey Shore

Nita, thanks for the comment, but I don't know what you mean by "how bad things are at The White House." 

Apr 08, 2011 08:29 AM
Mike Wong
Keller Williams Realty Southwest - Sugar Land, TX
Realtor: Commercial, Residential, Leasing, Invest

This is really going to hurt the market and recovery if this happens. I have several deals scheduled over the next 6 months that are depending on FHA, VA, and special government financing.

Apr 08, 2011 08:58 AM
Broker Nick
South Florida Real Estate & Development, Inc. - Coconut Creek, FL
Broker Nick Relocation Broker Service

FHA will be funded - it is totally seperate from government funds - come on with the facts and not just silly fear tactics.

Apr 08, 2011 09:08 AM
Karl Hess
Keller Williams Shore Properties - Barnegat, NJ
on The Jersey Shore

Nicholas, here's some "silly facts" for ya:

Shutdown Could Delay FHA Mortgages Borrowers looking to obtain an FHA mortgage face an uncertain situation over the coming days, should the federal government shut down as many are ...NASDAQ.com -

Shutdown Could Delay FHA Mortgages  MortgageLoan.com -

Even Short-Term FHA Shutdown Will Hit Housing  CNBC.com

Apr 08, 2011 09:19 AM
Mike Morrison
Will & Will Real Estate Brokers, The Woodlands, Texas - Houston, TX

Karl, I'm with Nicholas #4 on this one. Hurt Housing as compared to what?? Look at the close of the DOW. Down only 29 points ?? Yeah, the TBTF's, Hedge Funds and Pension Funds are real worried. You need to worry about the price of Brent & WTI Crude.

What we need is the secondary market back on track to sell *new* loans. When you boil it down, the loans you are concerned with are nothing more than sub-prime paper with a taxpayer guarantee. VA Loans a different story.

If the feds shut down, it's a shame it will fire it back up. 

Apr 08, 2011 09:50 AM
Karl Hess
Keller Williams Shore Properties - Barnegat, NJ
on The Jersey Shore

Mike; your post, while informative, is not relevant to the discussion.  If the government shuts down, FHA mortgages will probably be delayed...JP Morgan and Wells Fargo both concur.

Apr 08, 2011 10:10 AM
Mike Morrison
Will & Will Real Estate Brokers, The Woodlands, Texas - Houston, TX

Just more BS fear mongering from JPM & WF of all people. The TBTF's strike fear again!!!

Apr 08, 2011 01:28 PM