CNBC's Diana Olick reports on how the U.S. government shutdown may impact mortgage rates and programs, including the FHA and VA.

A potential U.S. government shutdown is expected to impact the housing market, particularly mortgage rates and loan processing. While the 10-year yield, which influences mortgage rates, has dropped, lenders are waiting to see if the change is lasting before adjusting rates. The National Flood Insurance Program will continue to pay existing claims but will not issue new or renewed policies, potentially delaying around 1,300 property sale closings per day.

Federal loan programs such as FHA, VA, and USDA will operate at reduced capacity or halt new loans, leading to slower processing for borrowers. Some critical FHA operations will continue, but activities requiring direct staff input are suspended. These disruptions are expected to cause significant delays in the housing process for many buyers and sellers.

U.S. government shutdown may impact mortgage rates

Now, the biggest impact from the government shutdown could be on mortgage rates. The 10-year yield, which mortgage rates loosely follow, is now down to the lowest level since September 18. But mortgage lenders haven't reacted to this yet. They're still waiting to see if that's a firm move down or if it's going to move any higher at the end of the day. Now, next is in the National Flood Insurance Program, or the NFIP. It will continue to pay out claims for existing policyholders, but will not write new policies or renew existing policies. A lapse would impact about 1,300 property sale closings per day, that according to the National Association of Realtors. This is, again, a delay, but the homes would eventually close if and when the shutdown lifts. Now, the FHA Mortgage Program, which provides low-down payment loans to borrowers with lower credit scores, would still operate to endorse new single-family mortgages, but likely at a reduced capacity, so slowing the process for borrowers, same for VA loans. The exception will be for products like home equity conversion mortgages. And critical FHA operations, though, such as claim payments, mortgage servicing, loss mitigation, and REO property management, those will continue. Activities requiring direct staff input, like some condo project approvals, are suspended, according to the NAR. Now, FHA, VA, and USDA made up just over 33 percent of all mortgage applications last week, according to NBA, so that is a significant delay. Now, the U.S. Department of Agriculture, that's USDA home loans, will halt issuance of new direct and guaranteed home loans, and any scheduled direct loan closings will be postponed. Again, these are rural home loans. Pending commitments will still be reviewed, but closings for guaranteed loans that don't have a guarantee will proceed, again, only at the lender's own risk. So a lot of, you know, little details in there, Carl, that basically say big delay for a lot of the housing process.

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