Government shutdown impacting Baton Rouge mortgage market

Prospective homebuyers wanting to use a U.S. Department of Agriculture Rural Development loan will have to wait until the government shutdown ends to file an application, leaving Capital Region mortgage lenders with looming backlogs.

The RD loan program—typically comprised of lower-income buyers in rural areas who want to purchase with 100% financing—is idle during the shutdown. Meanwhile, lenders can’t submit loans without access to tax returns.

What does this mean for the nine-parish Capital Region?

“(The backlog is) going to continue to mount (if the shutdown continues) and borrowers won’t be able to close on houses,” says GMFS President Tee Brown. “And it’s out of our control.”

As the largest USDA lender in the state, Brown says Baton Rouge-based GMFS handles about $20 million worth of RD loans from roughly 120 applications each month in Louisiana.

On a smaller scale, Aaron Taravella, a GMFS mortgage loan officer, estimates 20% of his clients—most of whom live in Ascension and Livingston parishes—use RD loans, adding he currently has “some in the pipeline.”

The issues isn’t as significant for Assurance Financial, where last year about 8% of its clients nationwide used a RD loan, though owner Kenny Hodges wasn’t able to immediately provide figures specific to Baton Rouge. Fortunately for lenders and borrowers thus far, he says, the holiday season typically isn’t a busy time for home buying.

“If we were into our buying season in April, there would be more pressure from lobbying groups to get this resolved,” Hodges says.

When the shutdown will end is anyone’s guess, but Red River Bank Executive Vice President Tammi Salazar says it’s causing disappointment amongst the 15% of the bank’s borrowers statewide who take out RD loans. And after the shutdown ends, she says the work is far from over.

“There’s going to be such a backlog,” Salazar says. “It’ll take a month to get all these files through because they’re stacking up and nobody is looking at them.”

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