As if home buyers don’t have enough on their minds.
In addition to high interest rates and high home prices, Americans applying for government-backed mortgages may face unexpected delays in the event of a partial government shutdown.
With the new fiscal year approaching Oct. 1 without funding because lawmakers have not yet reached a deal, the Biden administration has already begun advising federal agencies to review and update their shutdown plans.
If Congress does not pass legislation to renew funding by September 30, the federal government will shut down at midnight, significantly impacting American consumers.
“ in the event of a partial government shutdown, according to a Zillow analysis provided exclusively to MarketWatch.”
Homebuyers may face delays in getting a government-backed mortgage. People in the process of closing on a home — taking out a Federal Housing Administration loan or a Department of Agriculture loan — would need the agencies to finalize their mortgage.
When the government shuts down, federal agencies operate with limited staff, resulting in fewer applications being processed.
If these agencies cease operations, thousands of buyers could be left in the lurch, with the risk of their home sales falling through as the sellers turn to other buyers who may have other sources of financing or come up with cash.
An estimated 2,528 home loans per day could be deferred in the event of a partial government shutdown, according to a Zillow analysis provided exclusively to MarketWatch.
“A government shutdown would leave some would-be homebuyers with outstanding loans in limbo,” Nicole Bachaud, senior economist at Zillow, told MarketWatch.
Read more: How a partial government shutdown would affect you
The Trump-era shutdown in 2019 was the longest in US history, when the federal government was closed for 35 days. Then-President Donald Trump wanted more money for a border wall between the US and Mexico.
Zillow economists Nicole Bachaud and Jeff Tucker then noted that when the government underwent a lengthy shutdown in early 2019, government agencies were operating with limited staff and experiencing delays as a result.
In the fourth quarter of last year, the FHA made 140,888 single-family loans in 61 business days, Zillow economists found. That amounts to an average of about 2,310 per day.
According to Home Mortgage Disclosure Act data, there were 54,603 U.S. loans made by the Department of Agriculture Farm Service Agency and Rural Housing Service over 250 business days in 2022. That equates to about 218 per day, Zillow economists said.
The shutdown also disproportionately impacts Black homebuyers, Bachaud and Tucker noted, because they rely more on federal agencies for mortgages. In 2022, a quarter of loans to Black home borrowers were FHA and USDA loans. In contrast, only 9% of loans made to white borrowers came from the FHA and USDA.
“Black borrowers are expected to feel this most directly,” Bachaud added.