Hardest hit by far is the Department of Agriculture home loan program. USDA loans, which are 30-year fixed with no down payment, make up less than 5 percent of the total mortgage landscape but are a favorite among first-time buyers and builders. As the so-called exurbs expand, more borrowers are qualifying for these loans. USDA is currently closed and not processing any loans.
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"Some lenders are using this to advance competitive opportunity, rather than calling for an end to this, by advertising that they can close the loans if others cannot," wrote David Stevens, CEO of the Mortgage Bankers Association, in an email over the weekend. "This disruption is negative for housing and the consumer and will only get worse as this extends."
Stevens circulated an online ad sent to him by Premier Nationwide Lending, which touts "Good news for most of your borrowers!" The company said it has revised its policies to allow loans to be funded without IRS tax transcripts.
It noted that its policy is "short-term" and "temporary." An embedded video shows John Hudson, Premier's vice president in charge of regulatory affairs noting that USDA loans are still shut down, and that one family he's working with is "homeless" because of the shutdown.
Uncertainty in the mortgage market could not have come at a worse time. After a robust spring and summer sales season, housing was already beginning to slow down this fall, thanks to higher mortgage rates. Now concerns about the shutdown and the potential debt crisis have potential buyers pulling back yet again.
"Our September National Housing Survey results show that the improvements in consumer housing attitudes witnessed in recent months softened ahead of the government shutdown," said Doug Duncan, chief economist at Fannie Mae. "Americans' awareness of policy uncertainty leading up to the Oct. 1 shutdown and the pending debt ceiling debate appears to have grown as indicated by an apparent cautionary holding pattern in overall consumer housing and personal finance sentiment."
—By CNBC's Diana Olick. Follow her on Twitter @Diana_Olick.