Unless you are a Federal employee most of us have been trying to figure out how the government shutdown is going to affect or impede our daily lives. Being in real estate it is natural to wonder how the shutdown will affect housing and mortgages.
More than 90% of the residential housing market depends on the government or GSEs for underwriting, insurance and funding for new purchase loans. Mortgages issued by Fannie Mae and Freddie Mac will reportedly not be affected as they do not depend on federal appropriations to operate, but rather they are funded by fees from lenders.
It is reported that mortgages will continue to proceed through the usual channels but some delays may be expected. The HUD department shut down yesterday morning and issued the following statement: “Most HUD programs have been temporarily interrupted and most HUD employees have been told they cannot work. We will not be able to check this account or respond to questions during the shutdown.”
The Department of Veterans Affairs will continue its loan guarantee program but cited potential delays and the Department of Agriculture will cease its mortgage financing activity.
How Delays Affect Short Sales
The concern with regard to how the shutdown will affect mortgages is delay. Being in the real estate and particular short sale industry we know this can cause some issues. When a lender issues an approval letter for a short sale it is “go” time to close within the specified time period stated in the letter. Typically lenders only give 30 days to close, sometimes longer and while it is always “possible” to ask for an extension it doesn’t mean it is guaranteed.
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