Sequester to have minimal effect on mortgage finance

The across-the-board budget cuts enacted into law in 2011 to reduce the federal deficit take effect Friday, March 1, absent additional action by the government.

Some $85 billion, split between defense and domestic discretionary programs, is scheduled to be cut over the balance of 2013. In all, about $1.2 trillion is to be cut over the next 10 years.

Not counting the economic impact on housing demand, the cuts are expected to have minimal impact on federally backed mortgage finance programs because the sequester applies to program dollars, not loan guaranty authority. For that reason, loans backed by the FHA, the VA, and the Rural Housing Service are expected to remain at current levels.

The two secondary mortgage market companies, Fannie Mae and Freddie Mac, which remain under federal conservatorship, will also likely see little impact from the sequester.

Two additional budget deadlines are ahead. The deadline for extending a continuing resolution that’s in place is March 28. A continuing resolution is a temporary budget measure that keeps the federal government operating in the absence of congressionally passed appropriations bills. And the deadline by which the federal government must raise its debt ceiling, which enables it to borrow funds to service its existing debt, is May 19.