At the FHA, which plays a crucial role in the housing market by insuring loans with low down payments for first-time home buyers, the full-time staff of 3,000 is down to 64, and there are just 30 employees responsible for signing off on mortgage insurance for single-family homes. While large banks have the resources to approve lenders for FHA-backed loans, smaller lenders rely on the agency itself to do this.
About 25 percent of home purchases are made with mortgages backed by the FHA and 15 percent of all mortgages, including refinancings.
Another 10 percent of home loans are guaranteed by the Department of Veterans Affairs, which still has a full staff approving mortgages for veterans. But the Department of Agriculture, which backs less than 5 percent of mortgages, has canceled new loans and guarantees in its program for buyers in rural areas.
The shutdown of Agriculture's Rural Development loan programs has cost Matthew Green the starter house he's been waiting to buy since April, when his real estate agent showed him a three-bedroom split-level on an acre in Warrenton that was in foreclosure.
Green, 28, a mechanic who works in Chantilly, Va., was approved in late August for a $210,000 loan. The next step was getting the government to sign off so he didn't have to make a down payment.
On Monday, a day before the shutdown, the lender called his agent, Starr Ibach, and reported that the Rural Development staff was backed up but that there was still plenty of time for the loan to go to closing on Oct. 16. Then Green got a text message from Ibach early Tuesday morning: "RD is closing down and no one's working."
"It just made me sick to my stomach to think I might lose this house and there's nothing I can do about it," Green said Friday. "What are the odds of this happening?"