Government Shutdown Could Damage Local Housing Recovery

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EAST LANSING -- A mid-Michigan housing market trying to climb out of the depths might hit a roadblock come midnight Friday.

"April, May and June are the three biggest months of the year [for realtors]," said Bill MacLeod, president of the realty firm Coldwell Banker Hubbell Briarwood. "And this is not the time to be challenging any of the mortgages that are out there."

MacLeod warns a government shutdown would prevent the Federal Housing Administration from guaranteeing new home loans. Problem is, FHA mortgages make up about a third of the market.

"FHA is a lending arm of the government that makes it possible for many of the banks here locally to have loans for less than 20 percent down," MacLeod said.

News 10 also spoke over the phone Wednesday night with a Flagstar Bank representative, who said it and other large banks will likely self-insure those loans if the government shuts down.

But MacLeod says the smaller banks can't take on that kind of risk, and the impact could be felt by just about everybody.

"The longer this runs, the more that we risk the possibility that some of these people will have rate adjustments in the mortgages that they've applied for," MacLeod said.

And that's not all. Under a shutdown, the government would likely stop providing or guaranteeing loans through the U.S. Department of Agriculture's Rural Development program, which helps building housing in less-developed parts of the country.

Officials from the Lansing Rural Development office told us "No comment" on whether or not they'll stop working under a shutdown.

But federal workers at the Flint office said they'd come to a halt for as long as the standoff lasts.

Taken together, some housing industry experts worry the impact of all this could be massive.

"It would be very disruptive to the hardest-hit part of our economy," Moody's Analytics' economist Mark Zandi told NBC. "Of course, housing prices are still falling and that would reverberate broadly across the entire economy."

Yet another motivation for lawmakers in Washington, D.C., to make sure this thing gets done by midnight Friday.




 
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