With about 30 percent of all new mortgages in the US housing market financed by the government, the Washington budget deadlock could threaten many American's dream of owning their own home.
Home ownership has been a staple of the American psyche, as the 2008-2009 financial crisis is testimony. Much of the debt was amassed by starry-eyed owners who grabbed cheap mortgages they couldn’t afford.
After Congress failed, Obama lamented the shutdown would have a "very real economic impact on real people, right away," also warning closed federal services would 'throw a wrench' into economic recovery in the US.
House prices have recovered more than 20 percent since the sub-prime mortgage crisis, and have been a strong indicator America’s economy is ‘back on track’. Though new mortgages can be accrued, loans will be delayed. First-time home buyers, who need to submit a slew of documents to be verified and re-verified, will face big delays.
US federal programs that process paperwork for mortgage approvals are understaffed. If people can’t get mortgages to pay for their homes, recovery in the US housing market – a backbone of the economy – comes under threat.
The US Department of Housing and Urban development lost a majority of its fulltime staff- with only about 350 employees of a total of over 8709 in the office processing mortgage loans.
The US Federal Housing Finance Agency, which accounts for about 15 percent of new loans, only has 64 of its 2,972 employees processing loan paperwork. The agency also regulates mortgage giants Fannie Mae and Feddie Mac, but loans won’t be affected because fees are collected through private lenders.
The US Department of Agriculture has said they won’t be issuing any new housing loans while its Rural Development program is shutdown. The branch has warned the shutdown could lead to “a setback in construction start-up,” and if the shutdown lasts for an extended period, “a substantial reduction in housing available in rural areas relative to the population.”