© 2024 Arizent. All rights reserved.

Government Shutdown Could Slam FHA, but GSEs Okay

The Federal Housing Administration (FHA) has critical lending programs for homebuyers, particularly first-timers, but will have to stop endorsing new mortgages if Congress cannot agree on a budget deal with the White House by midnight Friday and the federal government is forced to shutdown.

"FHA cannot offer endorsements for any new loans in the Single Family program and cannot make commitments in the Multifamily in the event of a shutdown," according to a memo drafted by a housing trade group.

Last year, FHA insured nearly 40% of all home purchase mortgages totaling $200 billion, according to Keefe, Bruyette & Woods analysts.

But a government shutdown would not stop Fannie Mae and Freddie Mac from purchasing and guaranteeing mortgages, according to the GSE regulator.

The GSEs are in conservatorship and dependent on a Treasury Department line of credit to stay afloat.

Nevertheless, the terms of the conservatorships and Treasury's support is not affected by the budget process.

"A government shutdown would not impact the Enterprises' operations as the Treasury Department Preferred Stock Purchase Agreements with the Enterprises are not subject to the annual appropriations process," according to a statement issued by the Federal Housing Finance Agency.

The GSE regulator would not be subject to a shutdown either.

For reprint and licensing requests for this article, click here.
RMBS
MORE FROM ASSET SECURITIZATION REPORT