Get it Together, Congress! Government Shutdown Threatens Plunge In Housing Market For Minorities
The housing market was just getting back on its feet, but all that progress is threatened by the government shutdown. And it’s minorities, according to Think Progress, that will feel the brunt of the impact.
It’s a week and a half now and Congress is still locked at a standstill. Debates over the debt ceiling and Obamacare can snowball into a larger issue that knocks down homebuyers who rely on the Federal Housing Administration (FHA) or Department of Agriculture (USDA) for mortgage lending. Under the government shutdown, the FHA is understaffed and the USDA is shutdown. And both agencies are often used by borrowers of color to obtain credit.
Before any application for a mortgage can proceed, borrowers must provide their income and social security number that must be verified by the Internal Revenue Service and Social Security Administration. Due to gridlock in Congress, mortgage seekers may find their applications deferred. Homebuyers may still encounter glitches as they try to finalize loans or apply for a mortgage. “If homebuyers can’t finalize their mortgages, they won’t be able to purchase properties,” according to Think Progress.
The government shutdown is looking quite crummy for renters, as well. The Department of Housing and Urban Development is only operating with 4 percent of their staff; the task of distributing funds to public housing authorities is daunting. The funds are used for housing choice vouchers which allow two million households to stay in their homes.
If the government keeps its light off until November, public housing authorities could suspend the issuance of these vouchers because of the “new financing uncertainty created by the shutdown,” Think Progress adds.
Construction of new apartments also remain threatened by the shutdown since the costs are subsidized by FHA financing.
“Most worrisome is the uncertainty about the economy that would accompany any debt default,” Think Progress concluded. Lenders and investors, who are already hesitant, will become even more apprehensive about the housing market. This would be a setback that could make mortgages more expensive and too difficult to obtain.