The Government Shutdown’s Impact On Housing

After being named the longest government shutdown in history, the government finally opened its doors back up temporarily until February 15th–pending approval of budgetary needs for the President’s wall-funding request. During this tumultuous shutdown, many federal workers went without pay. Approximately 800,000 workers were furloughed, and according to Inman–leading news source for real estate agents–these workers owe about $438 million in mortgage and rent payments collectively this month (source).

Effects On The Housing Market

While the mortgage industry has reached an 18-year low, furloughed workers who are struggling to pay their bills without receiving consistent paychecks are starting to have even more severe effects on the housing/mortgage industry. If the shutdown continues again after February 15th, more extensive damage to the market can occur. For example, families who were potentially buying new homes had to sit out of this opportunity since they were later affected by the government shutdown and did not have the necessary funds for a proper down payment. Even before the government shutdown, the housing market had started to slow down. However, with the shutdown, closing on houses were delayed, causing a major drop in buyer confidence.

Additionally, in a report by Bloomberg, nearly 20% of real estate agents claimed they had clients who were affected by the shutdown in some way. The National Association of Realtors’ Chief Economist, Lawrence Yun, believes that if the shutdown is quickly resolved–without out any issues proceeding February 15th–then issues throughout the mortgage and housing industry will resume normal activity. However, if this shutdown persists, it will seriously hurt the economy.

Some Banks Are Helping Out

During the longest government shutdown in history, banks across the US offered assistance to many clients who were affected during this troublesome time. Many banks like Wells Fargo & Co., M&T Bank, PNC Financial Services Group Inc., and others lent a helping hand to customers by waiving certain late fees and offering assistance options. Wells Fargo began to automatically reverse monthly service and overdraft/non-sufficient fund fees for customers who were directly affected by the shutdown. Additionally, any late fees that accumulated on credit accounts are planned to be eliminated.

In addition to these services, Wells Fargo worked with customers who were having trouble making loan payments to come up with various short and long-term assistance options. M&T Bank also stepped up to the plate and allowed customers to defer payments or make partial payments until they were granted full pay. M&T also waived maintenance and non-sufficient fund fees for the remainder of the shutdown. Phil Hosmer, spokesman for M&T Bank stated, “They just need to tell us verbally that they are affected by the shutdown” (source).

Additionally, if customers of M&T Bank who are affected by the shutdown and have mortgages, loans, lines of credit, and credit cards, the bank will postpone adverse credit reporting, delay repossessions, and waive late fees for the remainder of the shutdown.

Protection For Federal Workers

To secure federal workers from the effects of a government shutdown, many Democratic lawmakers introduced new legislation that would protect these workers from foreclosures and evictions. Sponsored by Sen. Brian Schatz of Hawaii and Rep. Derek Kilmer of Washington, this bill is designed to provide emotional stability during these difficult times of financial instability. In light of this new bill, Sen. Brian Schatz states, “Thousands of federal workers and their families are struggling to pay rent and make ends meet. It’s absolutely unacceptable. Our bill will protect federal workers and make sure they aren’t harmed because of a political stunt.” (source).

Known as the Federal Employee Civil Relief Act, this bill would prevent federal government employees impacted by the shutdown. The bill would help to prevent the repossession of property or fines for falling behind on loan programs. The Federal Employee Civil Relief Act will extend these protections throughout the duration of the shutdown, as well as the following 30 days after the government reopens.

As we gradually get closer to February 15th, only time will tell if the government will resume it’s shutdown, further affecting not only consumers but the mortgage and housing industry.