Real estate agent Chris Lavoie is worried about the impact of the government shutdown on homebuyers.
But it also has ensnared him personally, delaying action on a federally backed loan that he plans to use to buy a commercial building in Portland.
Lavoie, a broker with Keller Williams/Domaine, is buying a building on Deering Avenue and using a Small Business Administration loan to finance part of the transaction. He expected to wrap up the transaction early this year, but his banker is suggesting an extension will be needed.
How long? Through August.
“That’s costing me money,” said Lavoie, who expects eventual approval of the SBA loan. But the agency is closed – one of the dozens of federal offices shuttered during a budget impasse in Washington. Without the SBA loan, Lavoie can’t nail down other pieces of financing. “I can’t even figure out what my costs are,” he said.
Delays caused by the shutdown are only starting to affect the housing market in Maine. In most cases, problems can be traced to the Federal Housing Administration, part of the Department of Housing and Urban Development, which has programs to help first-time homebuyers, those with low down payments and operators of rental units occupied by low-income residents.
Most of the FHA operations are automated, but some require action by department staffers. Some of those workers are deemed nonessential and on furlough, and the remaining staffers are working without pay.
In one case, a York County homebuyer planned on ringing in 2019 in a new home. Instead, Groundhog’s Day may be a better bet.
The hitch in the sale of the Hollis home was caused by the government shutdown. Teddy Piper, team manager for ReMax by the Bay/The David Banks Team, which is handling the sale, said there weren’t adequate sales of comparable homes in the area on which to base the home’s appraisal, so the paperwork required approval from the FHA for a government-backed loan.
“We thought we were going to close (last month) on the 27th,” Piper said, but there weren’t enough FHA employees on the job to review the appraisal because of the partial government shutdown that began five days earlier. Now the homebuyer and broker are crossing their fingers and shooting for a closing by the end of January, he said.
“Had the government not shut down, we would be closed by now,” Piper said.
ANTICIPATING PROLONGED EFFECTS
The shutdown comes at a slack time for the housing market in Maine, because January is typically the slowest month. But the lack of pay for federal workers may cause other disruptions in the housing market.
There are about 15,000 federal employees in Maine, roughly 1,000 of whom will not receive paychecks Friday, according to an estimate from the Center for American Progress, a policy institute in Washington, D.C.
Nationally, the online real estate firm Zillow estimates that federal workers who own a home will owe $249 million in mortgage payments this month, while those who rent will owe $183 million to landlords. Many of the shuttered federal agencies have prepared letters for their employees to give to creditors, asking for understanding if workers can’t make payments because paychecks have stopped.
For the most part, real estate brokers in southern Maine said delays or hitches in home sales because of the shutdown, which enters its 21st day Friday, aren’t widespread, but they fear more may crop up if it continues.
Kim Gleason, who owns McAllister Real Estate in Hallowell, said she hasn’t seen any problems with traditional loans that aren’t backed by the FHA. But she said there could be issues if the shutdown drags on and begins to affect two quasi-governmental agencies – Fannie Mae and Freddie Mac – that help sell mortgages to investors on a secondary market, keeping funds flowing for the mortgage market.
Many of the tasks involved in getting a mortgage are automated, such as income verification and getting verified tax returns, but some have aspects that require final approval from a human, she said, and their availability is compromised by the shutdown.
“Ultimately, there is a person at the end somewhere,” she said.
‘OUR PIPELINE IS PRETTY STRONG’
Chris Pinkham, president of the Maine Bankers Association, said he’s heard no complaints from his members about the shutdown’s impact on mortgage processing and closings. Likewise, the Maine State Housing Authority, which often works as a go-between for bankers, homebuyers and the FHA, hasn’t noticed significant impact for housing purchases, but is watching to see if problems occur as the shutdown persists.
“If this continues, we expect to see delays,” said Denise Lord, a spokeswoman for the authority.
“Our pipeline is pretty strong so I’m not anticipating that we’re going to have an issue with FHA-insured loans,” she said. “I don’t think they’ll be that problematic, but obviously we’re watching it.”
Last year, the MSHA provided 186 loans for first-time homebuyers that were insured by the FHA. That’s about 16 percent of all its home loans, she said.
In 2016, the most recent year for which data is available, the federal agency endorsed about 3,000 Maine mortgages overall. There were more than 17,500 home sales that year.
Lord said the MSHA also handles federal aid to multifamily subsidized housing. Those payments are designed to help keep rents low, with money flowing from HUD through the state agency to landlords. But the money for the subsidies didn’t come through in late December, Lord said, because of the shutdown.
About 20 contracts required the payments, she said, and the state agency contacted property owners to let them know the money hadn’t come in and payments would be delayed.
She said the property owners have – so far – been understanding, and some have reserve funds for their properties to draw on.
Edward D. Murphy can be contacted at 791-6465 or at:
emurphy@pressherald.com
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