Will Sequestration Kill the Housing Recovery?

“Massive government budget cuts set to go into effect March 1 would be, “deeply destructive” to all aspects of the housing market, US Secretary of Housing and Urban Development Shaun Donovan told a Senate panel last week. From programs for the homeless to reconstruction after Superstorm Sandy, the sequester would, “harm numerous families, individuals, and communities across the nation that rely on HUD programs.”

One of those programs that has been instrumental in the housing recovery is the government’s insurer of home mortgages, the Federal Housing Administration (FHA). Should the FHA lose staff, which it likely would, it would lose much of its capacity to process new home loans and mortgage refinances as well as sell foreclosed properties that it owns. Twenty-three percent of all mortgage originations in 2012 were FHA-backed, according to a report released Wednesday by Ellie Mae.

The FHA, however, is just the beginning. Sequestration would affect all loans in process, just as housing enters the crucial spring market….”

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