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Budget impasse threatens FHA lending

Shutdown would put gov't-backed mortgage insurance on hold
Published on Apr 7, 2011

The budget deadlock and looming shutdown of the federal government wouldn't affect Fannie Mae and Freddie Mac, but it could put the brakes on FHA and other government-backed loan guarantee programs.

The Obama administration has proposed $33 billion in spending cuts, while Republicans are reportedly pushing for $40 billion or more. House Republicans Thursday passed a bill to push back a shutdown by one week. But that bill includes spending cuts opposed by Democrats, and President Obama has threatened a veto if it's approved by the Senate.

In the event of a government shutdown, the Federal Housing Administration "will not be able to endorse any single-family loans, and staff will not be available to underwrite and approve new loans," a HUD spokeswoman told Inman News.

Although so-called "full eagle" lenders vetted by FHA have direct endorsement authority, in the event of a government shutdown FHA would power down its automated syst...

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