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Is FHA able to endorse single-family loans if the government shuts down?

No. Wait, yes it can.

September 30, 2013

The mortgage market took the time to dig through the Department of Housing and Urban Developments contingency plan for dealing with a government shutdown last week.

And industry professionals did a nice job reading the fine print, because the fine print changed over the weekend, creating some confusion as to whether HUD will be able to endorse single-family loans in the wake of a government shutdown.

The simple answer: They can endorse single-family loans, but this is a major change from what was reported by HUD on Friday.

HousingWire, along with other news outlets, discovered on pg. 42 of the contingency plan — underneath frequently asked questions — that as apart of HUD’s shutdown plan, the Federal Housing Administration would be unable to endorse any single-family loans. Furthermore, the report said FHA staff will not be available to underwrite and approve new loans. However, all of this was reported Friday, and the contingency plan changed over the weekend.

When I arrived at my desk Monday morning, I received various phone calls and emails informing me that HUD has updated its contingency plan from what was originally reported.

The truth is FHA will be able to endorse single-family loans during the shutdown. In addition, a limited number of FHA staff will be available to underwrite and approve new loans.

This change was quite abrupt, with many industry analysts shaking their heads saying, it's "kind of important, don’t you think?"

After reaching out to HUD, staff from its Office of Public Affairs confirmed the plan currently on its website is the correct, updated version.

While it’s clear the former and current plans caused quite a few of us to scratch our heads, the housing agency has taken more steps than it did in 2011 when a similar government shutdown challenged the agency.

However, it’s no joke that any sort of government shutdown will require federal employees to cease working.

When put into perspective, of the roughly 9,000 HUD employees, only 350 employees will continue working after a shutdown — that’s only 3.8% of its staff.

Since everything with the government is still up in the air, we’ll cut HUD some slack because let’s face it, the possibility of a shutdown is enough to leave any entity uneasy.

The takeaway: Always read the fine print. The smallest change can make a world of difference.

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