The U.S. budget battle that has led us to sequestration will have effects on many government agencies, not just the military. One such agency is the Department of Housing and Urban Development and through them the Federal Housing Administration (FHA)
Bloomberg recently reported that HUD is preparing to lay off FHA loan origination and foreclosure counseling staff to help deal with the sequestration.
Department of Housing and Urban Development cuts will force staff reductions that could slow FHA loan approvals and curtail programs such as foreclosure counseling, according to HUD Secretary Shaun Donovan. If FHA lending drops by the same rate as HUD’s budget, it could shave about 2 percent off U.S. home sales this year.
In an interview with MSNBC, Secretary Donovan said:
We’re still recovering from the economic disaster of our housing crisis and my agency through the Federal Housing Administration is responsible for about a quarter of all new loans for homeowners and rental apartments. With that slowdown in processing there, there’s a risk that the recovery we’ve seen over the last year in the housing market is going to put at risk.
The slow down in mortgage lending could contribute to a slow down in home sales. There should not be much effect in FHA insured home loan approvals from lender with DE (Direct Endorsement) underwriters, however, small lenders without DE underwriters could be in a slow down position.
About the author: Fred Chamberlin is a senior loan officer with Guild Mortgage Company in Oak Harbor. He has been in the mortgage origination business for over 20 years and in the lending business for over 30 and authors a number of mortgage related blogs.