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DC gridlock hurting mortgage business, LendingTree CEO says

Is DC holding the market hostage?

The budget gridlock in Washington is affecting the mortgage business, LendingTree Founder and CEO Doug Lebda said Friday.

"D.C. is generally causing a lot (of) turmoil and mayhem in the mortgage market," Lebda warned. LendingTree is an online exchange connecting consumers with lenders offering mortgages and refinance loans, home equity loans and lines of credit.

Lebda said lenders are feeling a pinch but that's actually good for the company's business. LendingTree is counter-cyclical to the market, as it sends leads to lenders.

"When they've got all the volume they want, we're like selling ice cubes to Eskimos but at a time like this they're asking us for more and more," Lebda explained.

(Read more: Falling rates boost mortgage apps for second week)

Mortgage rates fell last week after the Federal Reserve announced its bond-buying stimulus program was here to stay, at least for the time being. The average 30-year fixed-income mortgage rate fell to 4.32% last week, down 4.5% from the week before, according to Freddie Mac.

(Read more: What housing slowdown? Home resales jump to 6.5 year high)

Lebda also said mortgage lending guidelines are loosening. For those "who were left on sidelines because of tight guidelines, now we're seeing they're loosening up, and getting more appropriate... private securitizations are opening up," Lebda said.

"I think housing is going to continue to do fine. We're coming off of historic lows, we've got a lot investors who bought up investment properties so the market is still very tight but ultimately housing moves with the economy," he said.

However, he said the investor market is largely past us.

"People were buying investment properties, three, four,five years ago, what I hear is that's slowing down now and what you've got is normal consumers buying normal houses that they actually want to live in," he said.

—By CNBC's Katy Byron. Follow her on Twitter @kbyronCNBC