The Trump administration is planning to lay off at least 40% of the Federal Housing Administration’s (FHA) workers, according to a Bloomberg report.
The FHA is just the latest target of the Trump administration’s Department of Government Efficiency (DOGE).
The FHA provides mortgage insurance on loans for people who otherwise wouldn’t qualify for one because of low credit scores or insufficient income. The cuts could have ripple effects for homebuyers hoping to jump into an already soft real estate market, according to experts.
Levi Rodgers, owner of the VA Loan Network, which specializes in loans for veterans, thinks the purge could put a chill on an already frosty market. Interest rates hovering near 7 percent in recent months have dampened demand among buyers.
“Layoffs of this scale could trigger automatic processing delays, and FHA closing times and applications could take longer,” Rodgers says. Conventional loans could benefit because sellers could begin choosing conventional financing for its faster turnaround.
But a hollowed-out FHA could impact marginal borrowers the most, Rodgers says.
“With fewer underwriters, more stringent lending requirements also are on the table, and marginal-qualified consumers could be required to have higher credit ratings or more savings for approval,” Rodgers says.
In addition to impacting marginal borrowers, Rodgers says, newer FHA products such as down payment subsidies or simplified refinancing could take more time to implement, leaving some future homeowners with more costly alternatives.
“This staff reduction brings a degree of uncertainty into the mix and could complicate securing FHA-backed financing for those relying on the program,” Rodgers says.
Luke Siegel, founder and CEO of residential door company Raydoor, fears the impact on demand will be significant.
“I could see these delays heavily impacting demand, specifically for entry-level homes,” Siegel says, adding that if FHA loans take longer to process or become more difficult to obtain, many buyers are going to be forced to explore alternative financing.
“On top of that, sellers relying on FHA-backed buyers may face prolonged closing timelines, potentially leading to pricing adjustments or increased competition from buyers with conventional financing,” Siegel says, noting that it’s too early to assess the full impact.
“Homebuyers should absolutely be prepared for slowdowns in the process and I would recommend them to work closely with lenders to explore financing options,” Siegel says.