Deep staffing cuts that are reportedly looming at the Federal Housing Administration (FHA) could affect several loan programs relied on by first-time homebuyers. However, as of Friday the picture inside the agency remained unclear.
Earlier this week, Bloomberg reported that as many as 40% of the staff at FHA could be cut as part of an initiative to pare down the size of government by the U.S. Department of Government Efficiency (DOGE), led by Elon Musk.
A spokesman for the U.S. Department of Housing and Urban Development told CNN, however, that the report was inaccurate, without clarifying if layoffs were ruled out at FHA.
Mortgage industry trade groups have been silent on the possibility of deep cuts at FHA. Scott Olson, executive director of the Community Home Lenders of America, said the organization is “monitoring” the situation.
“We’re trying to make sure that the programs are running efficiently and effectively,” Olson said during an interview on Thursday. “And then we’re looking at, in particular, things where specific approvals are needed from the agencies, like loans that are done through manual underwriting at FHA.”
Olson said he doubted there would be widespread disruption or processing delays for standard FHA loans, even if there are layoffs inside the agency. However, disruptions could occur in related areas if there are staff cuts at FHA or Ginnie Mae, which securitizes government mortgages and sells them on the bond market to investors.
The FHA bond program ensures that the administration’s programs remain liquid, ensuring that loans can be made widely available and are affordable.
“One of the things we’re keeping an eye on is we want to make sure that the level of staff doesn’t affect their willingness and ability to maintain a broad base of issuers,” Olson said. “There’s like 350-plus issuers and a lot of smaller issuers, and we want to make sure that continues.”
FHA runs several loan programs that are primarily aimed at people with low-and-moderate incomes and first-time homebuyers who might have lower credit scores or less money to put down on a home.
These include standard FHA loans for single-family homes, as well as other programs, such as reverse mortgages for seniors and loans that roll in the costs of renovations. There are also loans for buyers and builders of multifamily properties, including condominiums and rental apartments.
These programs could be unevenly affected if the agency is hit with significant layoffs that disrupt its operations. For example, most borrowers of standard FHA loans for a single-family home will likely notice no change, at least initially.
Most standard FHA loans are underwritten and then directly endorsed by FHA-approved lenders. In other words, the lender determines whether the borrower meets the guidelines and can sign off on the loan. By contrast, condominiums need to be on an approved FHA list for a lender to directly endorse them. Otherwise, a condominium loan needs FHA staff approval.
