FHA says a Trump funding freeze wouldn't jeopardize deals

With uncertainty swirling around President Trump's controversial funding freeze, the Federal Housing Administration assured buyers and lenders it would not impact deals currently pending. 

On late Monday, the Office of Management and Budget imposed a temporary pause on government funding to ensure alignment with recent executive orders applying to elimination of diversity, equity and inclusion programs and environmental policies, among other issues. 

In a notice sent late Tuesday, the Department of Housing and Urban Development, which oversees the FHA, said its mortgage insurance programs "remain operational and are not subject to the pause in federal grants and loans outlined in OMB's memo to federal agencies."

The announcement came in response to a statement released earlier that day by the Mortgage Bankers Association requesting the FHA, Department of Veterans Affairs and U.S. Department of Agriculture provide details assuring that transactions were not in jeopardy of falling through due to the lack of insurance availability. The new rule went into effect at 5 p.m. Tuesday.

The agencies "must clarify that the January 27 OMB memo calling on federal agencies to temporarily suspend payments for federal grants, loans, insurance and loan guarantees does not apply to the single-family and multifamily loan insurance or guarantee programs," the trade group's statement said.

"Americans are going to the closing table tomorrow and deserve to know that their loan will close on their home purchase. Without this clear assurance that the federal government will insure new loans or pay claims under these programs, there will be severe harm to borrowers and disruption to the mortgage market," said MBA President and CEO Bob Broeksmit. 

In Monday's OMB memo, the office targeted "relevant agency activities that may be implicated by the executive orders," singling out financial assistance for foreign aid, nongovernmental organizations, DEI and other initiatives.

The president ordered funding to be paused at all government agencies until they completed comprehensive analyses to identify programs not adhering to his orders. They also will be required to assign oversight to a senior political appointee to ensure programs conform to the new policies. Reports are due to the government on Feb. 10.

While the presidential memo has led to more questions than answers, reports indicate funding that provide direct benefits to individuals are not subject to the pause. That would also include federal rental assistance, as well as student loans and Medicare payments. The freeze also only affects grant programs and not government contracts. 

In addition to mortgage insurance policy, federal programs under HUD's purview include community development block grants to support public housing and Section 8 vouchers. Also subject to review are programs affecting fair housing and manufactured homes.

Groups supporting local community organizations, such as the National Association of Housing and Redevelopment Officials, had advised their nonprofit recipients to draw on their currently available funding prior to the 5 p.m. deadline.

"NAHRO is investigating how this will impact HUD and whether this pause will apply to public housing, housing choice vouchers, and other programs that may be used by our members," it said. 

The MBA's statement arrived as many other businesses in the real estate community expressed immediate confusion with the government announcement and its potential lingering impact. 

"Realtors are wondering if closings will be affected, and builders are wondering if they will lose buyers if those programs go away," said Phil Crescenzo Jr., vice president, Southeast division at Nation One Mortgage, in a statement.

"No one is excited about anything that will make it more difficult to sell or close homes in this market," he added.