Government Shutdown Throws Rural Housing Markets Into Disarray

(Bloomberg) -- Across rural America, the government shutdown has eliminated one of the best options for low- to middle-income homebuyers, a zero down payment mortgage from the U.S. Department of Agriculture. That’s leaving deals and would-be buyers’ lives in limbo.

They’re begging sellers for extensions and struggling to decide when to mention their plans to landlords, said Shane Siniard, a loan officer with SWBC Mortgage Corp. in the Atlanta area, where the biggest share of the USDA loans are made, according to an analysis by Zillow. Siniard, one of the most prolific originators of the loans, has one client with a buyer who is unable to sell because he’ll need a payoff statement from the government.

“We have sellers who can’t sell and buyers that can’t buy,” Siniard said. “I’ve never experienced anything like this before. I can only imagine how bad it’s going to get.”

About 120,000 USDA mortgages were issued last year in areas designated by the government as rural, where the money goes further and borrowers’ options are fewer. In the Atlanta area, an average of about 1,700 USDA loans are made every year. They account for about 20 percent of Siniard’s Northwest Georgia business, he said.

The USDA product is highly prized in rural America because it’s one of the few that doesn’t require a down payment and is cheaper than most other alternatives for low-to-moderate income borrowers. Atlanta tops the ranking of metropolitan areas with the most USDA mortgage originations, followed by Charlotte, North Carolina, Nashville and the exurbs surrounding the nation’s capital, according to an analysis by Zillow.

“Even once the government resumes, there’s a huge backlog of loans that need to be processed by the USDA office,” Siniard said. “Normally, the turn time is 1 or 2 days. By the time the government resumes, I’m expecting weeks.”

While the Atlanta metro has the largest number of USDA mortgages, they represent about 2 percent of all loans there, according to Zillow. They accounted for 14 percent of loans in the Hickory, North Carolina area, a furniture manufacturing center outside of Charlotte.

--With assistance from Christine Maurus.

To contact the reporter on this story: Prashant Gopal in Boston at pgopal2@bloomberg.net

To contact the editors responsible for this story: Debarati Roy at droy5@bloomberg.net, Rob Urban

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