Mortgage Rates

A for sale sign stands outside a home on the market on Oct. 2 in the north Denver suburb of Thornton, Colo.

As the government shutdown enters its 27th day today, it has stopped dead some housing sales in Blount County for low-income families.

Jackie Mills, an Maryville agent for Realty Executives Associates, has a client with roughly $1,000 tied up in a housing sale that might never be completed, because paperwork for his loan from the U.S. Department of Agriculture cannot be processed.

And as the seller looks to find another buyer, her client might lose that money he’s poured into the home’s appraisal and inspection — not to mention the home itself.

“All because the government is shut down,” Mills said.

The case is not isolated.

Hundreds of low-income residents across the state depend on home loans through the USDA’s rural development program, which offers a way to finance almost the entire cost of the purchase price. The homeowner then pays back the government, often at low interest rates.

The 100 percent government-backed mortgages are only available for homes located within USDA-eligible geographic areas. Almost all of Blount County qualifies, with the exception of homes inside the Maryville city limits.

The loans are especially used in the Appalachian region.

“With the shutdown, we’re sitting on about 500 loans that we can’t move,” said Aaron Phelps, the communication manager at Fahe, a nonprofit network for the Appalachian region that also hosts an in-house mortgage business. The group is one of the largest packagers of USDA home loans.

Steve Smith, head of sales at the Knoxville-based lenders Mortgage Investor’s Group, explained that even when lenders approve an eligible home buyer’s loan under the program, it cannot be closed without the USDA’s final approval.

But because the USDA office cannot process the paperwork, let alone answer phone calls or emails, the approval can’t be given without great risk to the lender.

“In effect, it has stopped our closings nationwide, Blount County included,” Smith said of the USDA-backed mortgages.

In addition to watching news of the shutdown daily to keep clients up to date, the company also is preparing for additional complications when the government does reopen. The USDA will have a backlog of mortgage loans to work through as it tries to process new ones on time.

Dwight Price, a Maryville real estate agent with Keller Williams, said if the shutdown continues for much longer, it temporarily could double the length of time needed to close on a USDA-backed mortgage. The process typically takes 45 days, he said, but soon that could be 60-90 days.

“If I were to write a contract for you today, we don’t know whether to tell you to buy that house in one month, two months or three,” he said.

This presents a particular difficulty for those on apartment leases, he added.

Hill said the upside is that January is a low season for the housing market. There are not many buyers, and not many homes available.

But, she warns, if the shutdown continues into the sales season, the problem will be much larger.

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