The start of the fiscal year brings a partial government shutdown, but the mortgage application pipeline will continue to trickle. In an effort to maintain the stability of the mortgage market, the U.S. Department of Housing and Urban Development says it won't halt the processing of applications for government-backed mortgages.
Although HUD announced Friday it would cease working on mortgage applications that are insured by the Federal Housing Administration, it clarified its statement yesterday by saying it will continue to endorse FHA-insured loans.
Fannie Mae and Freddie Mac had already announced they will continue to operate during a government shutdown. Those two agencies charge fees to lenders for operational costs, so they are unaffected by the shutdown.
The Federal Reserve says government-insured loans accounted for 45 percent of all mortgages in 2012. They included those backed by the FHA, as well as the Veterans Administration and Department of Agriculture.
'Slower than normal'
While operations will not cease, they will likely slow considerably. FHA plans call for a 96 percent reduction in staff during the shutdown. "There will be a limited number of exempted FHA staff available to underwrite and approve single family home loans," Jereon Brown, deputy assistant secretary for public affairs, said in a statement. "The underwriting and approval process will definitely be slower than normal."
The last government shutdown lasted three weeks, from Dec. 16, 1995, to Jan. 6, 1996.