February 27, 2013
On March 1, 2013, unless lawmakers act to prevent the process known as sequestration, major budget cuts, furloughs and staffing changes will go into effect across a variety of government agencies. These cuts have the potential to be quite disruptive, and many wonder whether FHA home loans, refinance loans and other programs might be negatively affected.
According to HUD Secretary Shaun Donovan, the answer is yes. Donovan’s February testimony before the Senate Committee on Appropriations included some revealing comments about sequestration and its impact on the FHA/HUD.
“Sequestration would result in 75,000 fewer households receiving foreclosure prevention, pre-purchase, rental or other counseling though HUD housing counseling grants. This counseling is crucial for middle class and other families who have been harmed by the housing crisis from which we are still recovering, and are trying to prevent foreclosure, refinance their mortgages, avoid housing scams, and find quality, affordable housing. Studies show that housing counseling plays a crucial role in those efforts. Distressed households who receive counseling are more likely to avoid foreclosure, while families who receive counseling before they purchase a home are less likely to become delinquent on their mortgages.”
But that isn’t all. According to Secretary Donovan, the FHA loan program could also experience issues as a result of sequestration. ” I am privileged to lead just over 9,000 HUD employees around the nation in 81 field offices around the country. Specific plans are still being reviewed and finalized, but we believe that furloughs or other personnel actions may well be required to comply with cuts mandated by sequestration. The public will suffer as the agency is simply less able to provide information and services in a wide range of areas, such as FHA mortgage insurance and sale of FHA-owned properties.”
That is as specific as it gets with regard to Secretary Donovan’s testimony on how sequestration might affect FHA loan programs, but it’s a good idea to assume there may be delays in processing paperwork for FHA loans and refinancing loans where applicable. In cases where FHA approval or other involvement is needed, those delays are likely to occur when furloughs or staffing cuts affect workload factors. When additional guidance or information becomes available from the FHA or HUD, we’ll report it here.
Washington lawmakers don’t have much time left to pass legislation to ward off sequestration; if the deadline passes with no action taken, we’ll report any significant developments here.
Do you have questions about FHA loans or FHA refinance loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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