The federal shutdown Tuesday was having an immediate and unsettling effect on local housing-related programs Tuesday, with people of low to moderate means taking the brunt of it. Programs involving mortgages and rental assistance were among those affected.
At the Dane County Housing Authority, which gets federal funding to run its rental assistance program, Executive Director Rob Dicke said the agency was able to make its October payments to participating landlords. The program covers roughly 1,000 low-income families, or about 3,500 people, who get Section 8 vouchers to pay 70 percent of their monthly rent payments through the program.
But Dicke was worried about making November rent payments.
“If they don’t do something between now and Nov. 1, we won’t have the money to pay landlords on Nov. 1,” he said.
As it is, October’s rents were made with only a partial payment of $446,000 from the federal Housing and Urban Development, about $100,000 short of what the county owed to landlords for the month, Dicke said. The housing authority used reserve funds to make up the difference this time, but there’s no money to do that again in November, he said.
“This isn’t sustainable,” Dicke said. “If all of a sudden we get landlords who start to panic and start coming out of the program, I don’t know what we’ll do.”
What’s more, Dicke said the housing authority already has cut its home buyer education program and its down payment assistance program for low-to-moderate-income home owners, as well as any operating expenses it could, due to prior HUD funding shortfalls and budget cuts tied to the federal sequestration process.
“We are whittling down to our core functions of public housing and the Section 8 program, and we’re still losing money,” Dicke said. “We can’t continue to operate like this.”
Also dealing with uncertainty Tuesday were Madison-area bankers who handle mortgages made through federal agencies, such as the Federal Housing Authority and the rural development division of the U.S. Department of Agriculture, which provide low and even zero interest mortgages to qualified borrowers with low to moderate incomes.
But fewer new loans and delays in loan processing were likely due to dramatically reduced staff as a result of the shutdown, leaving many borrowers in a bind.
At River Valley Bank in Madison, mortgage banker Christa Sweeney said she was handling a USDA rural development loan scheduled to close on Oct. 11.
But with no way of knowing when the shutdown will end, it’s difficult for her to advise her borrower, who must decide if it’s worth the risk.
“We’re waiting for one more thing from (the USDA), but their offices are closed,” Sweeney said. “I just had a conversation with my client, saying there’s a chance you won’t be able to close. That’s the problem – if it opens back up in two days, no problem. If it takes 10 days or more…well, we’re supposed to be closing in 10 days.”
“His answer was that he was going to process it today and decide tomorrow,” she added.
Sweeney also noted lost or delayed mortgages sometimes have a “ricochet effect,” impacting sales and purchases down the line.
“The sellers of the house that my client is buying have an accepted offer on another house, and they won’t be able to buy that if they can’t sell theirs,” she said.
Sweeney shared the email she received from the USDA’s Rural Development division, informing her that many staff would be furloughed pending reinstatement of funding by Congress. Many other federal agencies were sending out similar emails or posting the information on their websites Tuesday.
“Staff will not be available by phone or email, and cannot carry out work for the Agency, until funding is restored,” the message said. “In Rural Development, this means that many services will be delayed or interrupted. For example, Rural Development will not be able to make any new loans or grants; the only exceptions will be for emergency purposes and to protect the Government's interest.”
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