LOS ANGELES - A U.S. government shutdown will immediately slow approval of thousands of mortgages. If it lasts more than a week, it threatens housing and the broader economic recovery.
Congress forced the first partial government closure in 17 years after failing to pass a budget, meaning borrowers in the process of obtaining home loans could be delayed as lenders are blocked from verifying Social Security numbers and accessing Internal Revenue Service tax transcripts.
The process may also lengthen the wait for borrowers seeking approval for mortgages backed by the Federal Housing Administration because its full-time staff is now less than a tenth of its normal size and the U.S. Department of Agriculture, which backs mortgages in rural areas, won’t take on new business during the shutdown.
“The last thing we need is anything that shakes the confidence in a softly recovering housing market,” David Stevens, CEO of the Mortgage Bankers Association and former head of the FHA, said in a telephone interview. “If it’s a short-term shutdown, it’s a story about these employees put out of work. If it’s long term, it’s a broader story about the adverse impact to the economic recovery.”
The shutdown comes as construction and new housing sales are climbing back from the worst financial crisis since the Great Depression. Builders broke ground on residences at an annual pace of 891,000 in August, up from a low of 478,000 in April 2009 while still only about two-thirds of the last 20 years’ average rate, according to Commerce Department data compiled by Bloomberg.