FHA Will Continue Endorsement of New Loans During Government Shutdown

Jamie Carmouche September 30, 2013

According to the newest contingency plan released by the U.S. Department of Housing and Urban Development, applications for FHA single family real estate loans will continue to be processed.  This is contrary to the previous statement by HUD that lending would cease if the government shutdown occurred. In its statement, HUD changed its position regarding the shutdown by saying: “The HUD Contingency plan posted on Friday mistakenly included incorrect information about a potential shutdown’s impact on the FHA single-family loan program.  FHA will be able to endorse single family loans during the shutdown. A limited number of FHA staff will be available to underwrite and approve new loans.” While it is anticipated that loan applications will still be processed, the approvals will likely be much slower, as HUD’s Office of Housing anticipates furloughing 2,904 of its workers in the shutdown, which leaves 68 employees to administering FHA’s portfolio of loans, underwrite and approve new loans, collect premiums, pay claims, respond to questions, as well as handle HUD’s rental assistance programs. If the government shutdown lasts for any length of time and the FHA begins to take a long time to process new loan applications, FHA buyers could be at a disadvantage, as sellers may start accepting offers that will assure a quick close rather than taking a chance on an FHA loan that might delay a real estate transaction.

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