Analysis: Unpaid federal workers owe $438m in mortgage and rent payments in January

Zillow report also sees effects on overall housing market

The roughly 800,000 federal workers either furloughed or working without pay during the government shutdown owe a total of about $438 million in mortgage and rent payments in January, according to a report published by real estate firm Zillow.

According to Zillow, the total breaks down to $189 million in monthly rent payments and $249 million in mortgage payments. Of the 800,000 affected by the ongoing shutdown, about 380,000 are furloughed and another 420,000 are working without pay.

“Like Americans in the private sector, many federal employees rely on each and every paycheck to cover critical expenses, including housing,” said Zillow senior economist Aaron Terrazas. “In many parts of the country, housing affordability is already stretched and a single missed payment can begin the long process toward foreclosure or eviction — which has long-term impacts on an individual’s finances and long-term economic prospects.”

In addition, the shutdown could “have a significant impact on the overall housing market if it continues to drag on and furloughed workers who also are would-be buyers get cold feet in the absence of paychecks,” said Terrazas.

Add to that the limited staff by which government agencies responsible for housing are currently operating. Most significantly, the shorthanded Federal Housing Administration faces delays in processing and endorsing the mortgage loans it insures, which could force some would-be home buyers to forego their planned purchases.

A Zillow analysis estimates that about 3,900 mortgage originations are processed each business day for loans backed directly by federal government agencies such as the FHA and the Rural Housing Service. It isn't clear what portion of those are delayed – or for how long – because of the limited staff during the shutdown, but as many as 39,000 mortgages could have been affected so far.

In addition, the shutdown could lead to administrative delays associated with loans backed by Fannie Mae and Freddie Mac, two independent agencies that insure the vast majority of mortgages. Those include lenders unable to get verification of employment for borrowers who are federal employees, and potential IRS delays verifying borrower incomes, which could lead to loans being denied.

Categories: Government, Real Estate & Construction