WSJ: What a Government Shutdown Could Mean for Housing

• April 6th 2011

by Mark Wellborn

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The looming shutdown of the federal government at the end of this week has been in the headlines for quite awhile, but The Wall Street Journal recently took a closer look at how the shutdown could effect the housing market.

The article points out that, from a housing perspective, the largest effect would be on the Federal Housing Administration (FHA). FHA loans, popular because of their 3.5 percent minimum down payment requirement, represented 37.3 percent of home loans in the DC area in February 2011, however, nationally FHA-loan usage fell to its lowest level in 27 months.

From the WSJ:

“…if the federal government shuts down, the FHA won’t be insuring any new loans. Banks will still be able to make FHA loans, but they’ll have to fund and hold onto those loans until the government re-opens for business. A spokesman for Wells Fargo & Co., the nation’s largest mortgage originator, said that Wells “would expect to be able to take applications and close loans provided that a shutdown doesn’t continue for any extended period.”

When the federal government shut down in the mid-1990s, the FHA issued this Q&A bulletin to lenders. UrbanTurf will update readers if/when a similar bulletin is issued if there is a government shutdown.

Update: On Thursday, Housing and Urban Development Secretary Shaun Donovan expressed his concern to lawmakers about what will happen to mortgage lending if there is a government shutdown.

This article originally published at http://dc.urbanturf.production.logicbrush.com/articles/blog/wsj_what_a_government_shutdown_could_mean_for_housing/3282.