Jacob Smith, a 25-year-old Florida firefighter, wasn’t paying much attention to the U.S. government shutdown until it threw his move to a new three-bedroom home near Daytona Beach into limbo.
Smith was ready to complete the purchase Oct. 1, the day the closure began. Now he has to wait until the Department of Agriculture reopens its mortgage business. For now, Smith’s landlord is allowing him to stay in his one-bedroom rental, crammed with boxes and furniture meant for the larger property. His builder, Adams Homes of Gulf Breeze, Florida, said it has about 10 other customers on the east coast of the state with purchases also on hold.
“It’s pretty ridiculous,” Smith said. “It seems rare that what you see on the news is directly affecting you. Hopefully it will end soon.”
USDA loans account for about 132,000 mortgages a year in areas designated by the agency as rural, according to the Mortgage Bankers Association. While they make up just 1.4% of the U.S. mortgage market, the product is one of the few available that allow zero-down payment loans and are an early warning of how the government’s first partial closing in 17 years could put a drag on the wider housing market.
“This is going to be devastating for people in the middle of getting USDA loans and for the communities that rely on the loans to support their housing markets,” said Camden Fine, president and chief executive officer of the Independent Community Bankers of America. “Everything has ground to a halt until the agency opens for business again.”
The shutdown resulted in hundreds of thousands of federal workers being furloughed, the closure of national parks and Internal Revenue Service call centers, suspension of clinical research trials at the National Institutes of Health and a halt to grants that fund Head Start, which offers educational programs and health care for 967,000 children whose parents live below the poverty line.
The budget stalemate centers on opposition by some House Republicans to President Obama’s healthcare law. Other consequences include lenders being blocked from verifying Social Security numbers and accessing Internal Revenue Service tax transcripts to confirm the validity of documents borrowers provide. The process also may lengthen the wait for borrowers seeking approval for mortgages backed by the Federal Housing Administration because its fulltime staff is now less than one- tenth of its normal size.
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