The U.S. Department of Housing and Urban Development has reversed their decision to halt the work on applications for loans guaranteed by the Federal Housing Administration. Previously, the HUD mistakenly concluded that it would stop working on loan applications, but in a statement provided by the HUD, it was noted that a limited number of FHA staff will be able to underwrite and approve new loans.

With the reduced staff, delays will be expected. More affected by the shutdown is the FHA’s Multifamily Housing Office, which may not be able to underwrite loans. If the shutdown continues for an extended amount of time, it would affect many more borrowers, and could put pressure on the housing recovery.

While the FHA will continue to underwrite and approve proposed loans, if the shutdown continues for a substantial period, delays and cancellations of loans will be inevitable. Fannie Mae and Freddie Mac, the government-controlled mortgage companies, have stated that they will continue their operations because they pay for their operations through the fees they charge lenders.

It is unclear whether the FHA will be able to handle the loads of loan applications because a majority of workers that have been furloughed will be unavailable to streamline the process. In hopes of a short government shutdown, loan processing should continue without major implications.

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