Housing and Urban Development Bureau
Source: Housing and Urban Development Bureau
Tens of thousands of federal workers have lost their jobs in recent weeks as the Trump administration seeks to cut government spending.
Federal Housing Administration employees could be one of the next goals: This is according to Antonio Gaines, chairman of the National Council of Government Employees 222, the union representing the largest number of employees at the Housing and Urban Development Agency.
It is unclear how many workers and what kind of workers are at risk of losing their jobs within the FHA, an agency under HUD.
“It’s not close to the 40% to 50% range that other program areas are experiencing, but there are some cuts,” Gaines told CNBC.
HUD Executive Director Scott Turner launched a government task force in February to review HUD’s budgets and find ways to reduce spending.
Bloomberg reported a potential slash of 40% against agency personnel. HUD did not reply to CNBC’s request for comment, but HUD officials told Bloomberg that the 40% figure was “not accurate.”
The White House did not respond to requests for comment.
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The FHA is one of the leading government agencies offering low down payment mortgages to home buyers eligible for US FHA loans, with a reduction of just 3.5% for eligible borrowers, including primary buyers, low and middle income buyers from minority groups and buyers.
According to Redfin, about 15% of mortgage home sales used FHA loans in December. Redfin Economist Chen Zhao recently told CNBC.
Experts say this means that potential FHA staff will cut back on FHA to FHA.
How low FHA staff is likely to affect home buyers
Although it remains to be seen whether FHA staff has been cut, and to what extent, layoffs should not affect their ability to obtain FHA loans, according to Melissa Cohn, regional vice president of William Raveis Mortgage. But they may slow the process down.
“There will be fewer loans approved for the same period, because fewer people are working on them,” she said.
“I can imagine it could lead to delays at every stage,” said Ingrid Gould Ellen, professor of urban policy and planning and director of housing and urban policy at New York University.
This could mean that it would take time to receive approval or resolve issues between the loan originator and the FHA after the loan is closed, she said.
“These delays will ultimately increase the cost of mortgages,” Gould Ellen said. He said it would take longer to close the loan and lock interest rates.
FHA staff typically execute borrowers’ applications through a model program that determines whether or not to obtain loan approval, said Richard Green, director and chairman of the University of Southern California’s Lusk Center for Real Estate.
In some cases, the system flags applicants as “exceptions” or individuals who need to do manual underwriting. This could be a “labor-intensive process,” he said.
“For those who get loans through manual underwriting, I think it will take more time if there is a staff cut,” Green said.
With fewer FHA staff workers, third-party lenders tasked with handling FHA loans could charge higher fees to compensate for additional labor, he said.
“People’s time is valuable, and if you’re telling your loan officer you have to spend more time doing an FHA loan, that shows up at the cost,” Green said.
A higher rate could result in a meal about how much the buyer could put in. This ultimately brings further burdens on individuals seeking a low-down payment mortgage, as they don’t have enough savings to fully cover the upfront costs.
For now, “normal business”
“So now, it’s business as usual,” she said.
However, keep in mind that reducing staffing can affect the time it takes to get an FHA loan. “Buyers looking to buy today will need to spend more time completing the transaction,” Cohn said.
Slow processing times can make offers less competitive, especially when sales in the market are usually close to short-term, she said.
For example, if you are shopping where it takes 30 days to complete a transaction, you will already be able to close the FHA transaction by saying, “Sellers may no longer wait.”
So if you are a first-time home buyer in the market, you can benefit from casting a wide range of nets when searching for mortgage funding. Look at down payment assistance programs at the state or local level. This will help to subdue more and expand lending options, experts say.
