At the FHA, which plays a crucial role in the housing market by insuring loans with low down payments for first-time home buyers, the full-time staff of 3,000 is down to 64, and there are only 30 employees responsible for signing off on mortgage insurance for single-family homes. While large banks have the resources to approve lenders for FHA-backed loans, smaller lenders rely on the agency itself to do this.
About 25 percent of home purchases are made with mortgages backed by the FHA, as are 15 percent of all mortgages, including refinancings.
An additional 10 percent of home loans are guaranteed by the Department of Veterans Affairs, which still has a full staff approving mortgages for veterans. But the Department of Agriculture, which backs less than 5 percent of mortgages, has canceled new loans and guarantees in its program for buyers in rural areas.
The shutdown of Agriculture’s Rural Development loan programs has cost Matthew Green the starter house he has been waiting to buy since April, when his real estate agent showed him a three-bedroom split-level on an acre in Warrenton that was in foreclosure.
Green, 28, a mechanic at Pohanka Chevrolet in Chantilly, was approved in late August for a $210,000 loan. The next step was getting the government to sign off so he didn’t have to make a down payment.
On Monday, a day before the shutdown, the lender called his agent, Starr Ibach, and reported that the Rural Development staff was backed up but that there was plenty of time for the loan to go to closing on Oct. 16. Then Green got a text message from Ibach early Tuesday: “RD is closing down and no one’s working.”
“It just made me sick to my stomach to think I might lose this house and there’s nothing I can do about it,” Green said Friday. “What are the odds of this happening?”
Green sold his Toyota Tundra truck two weeks ago to pay closing costs. If he doesn’t close Oct. 16, the bank has told Ibach the house will be sold at auction four days later.
The government shutdown comes amid a two-year surge in home prices as buyers have taken advantage of historically low mortgage rates. Even as rates have edged up in recent months, sales have not dampened as much as economists had feared. Sales of existing homes reached a six-year high in August.
For federal employees applying for a mortgage, the situation is even more daunting. With the government closed, verifying their income could prove impossible.
“Who’s going to be there to verify that someone works for the government?” said Peggy Ferris, an agent with Long & Foster. “No one.”
The shutdown and deep federal budget cuts are also making some lenders more cautious about extending loans to federal workers. Wells Fargo has begun requiring borrowers who work for the government to disclose whether their jobs are at risk of being affected by budget cuts “or if they’re at risk of being furloughed in any way,” said Ryan Dailey, a lender with Prosperity Mortgage, a Wells Fargo affiliate.
Home sellers are already starting to get jittery, several agents said.
“They’re asking, ‘If people are not going to be buying my house because they can’t get mortgages, should I take it off?’ ” Rosner said. “ ‘Or maybe I shouldn’t put it on the market.’ ”
Since the government shutdown, nearly 500 residential listings have been taken off the market in Montgomery and Fairfax counties and the District, according to the Metropolitan Regional Information System. In the District, that represents about 7 percent of all listings.
While lenders and real estate agents say they are having trouble getting clear information from the government, Kathryn Joseph, a senior mortgage banker with Apex, said she is being realistic with her clients.
“I’m telling everybody, including the borrower and the agent, that depending on when the government opens and we get these forms processed, we can’t guarantee a settlement date,” she said.
Other lenders are proceeding with business as usual, if only to get ahead of what they believe will be a very long line once the government reopens.
“We’re ordering the IRS transcripts so we can get in line, so our request is already in their inbox,” said Richard Harbin, a senior loan officer with Monarch Mortgage. “We’re still sending them in with the hope they’re going to be addressed, at some point.”