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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