WHEW, what a relief. Sequester will not Affect the FHA!!! The FHA may be affected by relaxed lending guidelines and bad loans, but the $85 billion sequester cuts will not affect it! According to the Federal Housing Administration (FHA), the cuts will likely have little effect on the housing market. The cuts will not affect federally-insured loans. Although the president is forecasting doom and gloom if the budget cuts are not averted (note: the “cuts” are really just cuts in future spending, not an actual reduction of current levels), the FHA says that “not counting the economic impact on housing demand, the cuts are expected to have minimal impact on federally-backed mortgage finance programs”. Lending levels will likely remain much the same, and Fannie Mae and Freddie Mac will “also likely see little impact from the sequester.”
Of course in our polarized society, others see things differently. Secretary of Housing and Urban Development (HUD) Shaun Donovan believes the situation to be problematic. Donovan told a Senate panel earlier this month that budget cuts would be “deeply destructive to all aspects of the housing market” and could affect FHA staff levels. This could potentially affect the FHA’s ability to originate loans even if it still has the wherewithal to do so, said Donovan. He added that he believes sequestration could also affect the jobs market, which would negatively affect housing since “borrowers need to be employed to close on their home loan, so if they have lost their jobs during the loan process they will not be able to close on their loan,” as one loan officer put it.
I think that we all have to take a step back and analyze sequester. It is $85 billion dollars. Sequester is phased in cuts. The pro rata share for 2013 is $45 billion. The cuts effectively restore certain federal budget items to 2007 – 2009 levels. Is this really catastrophic?
Comments(2)