Now that the Federal government has technically shut down over the budget impasse on Capitol Hill, many government services are “out of business” for the time being.  One very important section that is affected is the processing of FHA mortgages.  While Carol Galante, the Federal Housing Administration’s commissioner, has stated that FHA will continue to endorse single-family loans during the shut down, delays are going to be inevitable.  According to Galante, only “a very limited number of staff will be available to endorse new loans” and that they will take “longer to endorse.”

Aspiring homeowners who are looking to buy with an FHA insured loan will now face processing delays and the homes they are seeking are potentially slipping away in today’s steadily accelerating real estate marketplace.  Small business and farm loans are also stalled during the fiscal deadlock, placing the dreams of many Americans in limbo for the time being. Even when the budget wrangling has finished, there will be a backlog of applications to clear that could take weeks or even months to wade through and approve. 

While many low and middle income borrowers now simply have to wait for the Washington political games to conclude, NACA continues on with business as usual, approving and closing loans every day, still with a lower interest rate and minus the expensive Personal Mortgage Insurance associated with an FHA loan. 

The difference between the FHA and NACA products over the life of the loan is far greater than most people think. With a $200,000 FHA loan at the 4.375% rate posted on October 1, 2013, interest will total $159,485.39 over the thirty year period, while the NACA loan at 4.0% will only accrue $143,739.01, a savings of $15,646.38. 

That same homeowner with an FHA loan will also pay an additional $29,120.40 in PMI over the life of the loan. With CitiMortgage now covering the NSF fee for NACA borrowers, there is a total savings of $44,766.78 with the NACA loan.  Even if the homeowner paid the maximum 10-year NSF fee, the PMI savings are still $23,120.40 and total savings $38,766.78 compared to the FHA loan, making the NACA loan the smarter move by far under any circumstances. 

NACA’s Home Save Program may well also see a large influx of new members as a result of the federal government shutdown.  Roughly 800,000 federal employees are expected to be furloughed during the shutdown.  Should the budget stalemate last more than 30 days, tens of thousands of government workers could easily have no other choice but to default on their mortgages as a result of not receiving a paycheck.  Many will reach out to NACA’s Home Save Program to seek a modification of their mortgage in order to save their homes. 

In short, the federal government may have ground to a near halt, but NACA continues to operate without any effect from the shutdown. Our mission of making home ownership a reality for as many American as possible continues undeterred.

By TTrumble

Online Operations Team and Forum Administrator for NACA. Based in the NACA National Counseling Center in Charlotte, NC.

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