Omaha-area real estate and banking experts expect complications with getting a house loan to slow down the housing market if the federal shutdown drags on. But for now, they say, there’s been minimal disruption as adjustments are being made to get around mortgage-related hurdles.
“We’ve been given guidance on how we can continue to move forward with our loans, and I think lenders in general are doing that,” said Kelley Harwood, vice president of home mortgages for First National Bank of Omaha. “We’re not hearing of big disruptions.”
Realtors who help consumers buy and sell homes are anxious about future fallout, but so far have reported no major problems, said Deda Myhre, president of the Omaha Area Board of Realtors.
“We still have homes going on the market. We still have homes going pending. Agents are still going about their business as if everything is typical,” said Myhre, also with CBSHome Real Estate.
One government lender that indeed has halted loan activity is the Department of Agriculture. No new Rural Development loans or guarantees are being issued, and that generally has affected Nebraska communities with populations of less than 20,000, said Janet Tinney of Lincoln Federal Savings Bank, the president of the Nebraska Mortgage Association.
The USDA has cautioned that a shutdown beyond two weeks — the shutdown is in its second week — would have an “immense adverse impact on the rural economy” and set back construction starts.
Mortgages handled by giant government-backed companies Fannie Mae and Freddie Mac, which account for about two of every three home mortgage originations, should not be affected as their operations are funded by fees charged to lenders.
“So for those looking into conventional financing, you have nothing to worry about,” Tasha Moss of Omaha Real Estate Group tells people on her video blog.
Moss said the bigger uncertainty stands with approvals by the Federal Housing Administration, which endorses about 15 percent of the single-family mortgage market. Although some processing is handled through websites still up and running, the FHA is functioning with a severely slashed crew and its contingency plan said to expect delays.
Moss expects the FHA pipeline to be “just fine as long as this does not last for an extended period of time.”
The inability to obtain records from the shuttered Social Security Administration and the Internal Revenue Service presented a major threat early on. Many lenders require tax transcripts and confirmation of Social Security numbers as part of the course of closing a deal.
Harwood said, however, that Fannie Mae and Freddie Mac have relaxed those requirements. For now, many lenders are accepting tax returns and pay stubs to close on loans.
Guy Cecala, publisher of Inside Mortgage Finance, said that fear of further processing delays or other fallout of the federal shutdown is perhaps the greater threat to the fragile housing recovery.
“We’ve already seen that higher interest rates spooked homebuyers,” Cecala said. “So the housing market really doesn’t want to see any more bad news.”
He said a failure to raise the U.S. debt limit could result in an overnight hike in interest rates. “There is no question that would be negative.”