Fewer People
The smaller staff will take longer to process loans with low down payments that need mortgage insurance, a sign-off required for lenders that don’t have so-called “direct endorsement” authority. About 20 percent of FHA loans would require such a manual review after the loans close.
“There would be a handful of people managing the whole country for the direct endorsement backlog and it will probably be very slow,” Stevens said.
A partial shutdown of the U.S. government lasting one week would probably shave 0.1 percentage point from economic growth, according to the median estimate of economists, with the costs accelerating if the closing persists.
Research firm IHS Inc. estimates it will cost the U.S. at least $300 million a day in lost economic output at the start. While that’s a fraction of the country’s $15.7 trillion economy, the effects probably will grow over time as consumers and businesses defer purchases and expansion plans.
The furloughs will first affect spending in metro areas where federal employees make up more than 10 percent of the workforce, such as Washington; Virginia Beach, Virginia; Dayton, Ohio and Honolulu, according to Jed Kolko, chief economist for Trulia Inc., a real estate website.
Federal Paychecks
“If the shutdown persists, local economies and housing demand could be hurt -- especially in markets where people depend more on federal paychecks,” he said in a Sept. 30 note. “At the other extreme, just 1 percent of local wages in New York and San Jose come from federal paychecks.”
Builders most at risk of slowing sales because they cater to buyers using FHA financing include D.R. Horton Inc., Lennar Corp. and KB Home, according to Jay McCanless, an analyst with Sterne Agee & Leach Inc. in Nashville, Tennessee.
“Unless the shutdown turns into weeks rather than days, we do not expect a decrease in demand since the FHA stoppage should delay rather than cancel closings,” McCanless wrote in a Sept. 30 note.