Housing Crisis On The Horizon All Because The House GOP Can’t Get Their Way On ObamaCare
Congressional Republicans are so blinded with rage that they could create another housing crisis. All because that a black man got elected President of the United States twice and that their 40 plus attempts to dismantle the Affordable Care Act has turned into an exercise in futility, they have decided to force the federal government to shut down to teach “that boy” a lesson as one House Republican told a colleague of mine.
“I spent my entire academic career studying the Great Depression. The depression may have started because of a stock market crash, but what hit the general economy was a disruption of credit. Average citizens unable to borrow money, to do anything. To buy a home, start a business, stock their shelves. Credit has the ability to build a modern economy, but a lack of credit has the ability to destroy it, swiftly and absolutely.” -Federal Reserve Chairman Ben Bernanke as quoted in “Too Big To Fail”
It’s apparent that House Republicans really didn’t think this government shutdown strategy all the way through or maybe they did as the New York Times suggests today, something more sinister was at work (but that’s the subject for another blog).
Take for example the effect the government shutdown is already having on an already battered housing market. Real estate closings have been put on hold because lenders can’t verify the income of home buyers with the IRS nor can they verify a borrower’s identity with Social Security. That’s not all, reduced staffs at FHA, which was forced to reduce its staff from 3000 to 64 employees, can not approve mortgage insurance to protect lenders in the event the homeowner defaults on their mortgage and lenders are scrambling to assess their liabilities for writing loans without with federal paperwork or federal guarantees. The longer the shutdown lasts, the problem will get worse in magnitude just from the backlog. Even if the shut down ends tomorrow, there will still be the backlog of paperwork that needs attention before anything new can even be processed. If the crisis lasts much longer, lending and real estate sales will come to a complete halt causing property values to plummet as they did in 2008 and 2009.