Will the Government Shutdown be an Obstruction to the Housing Market?

January 22, 2018

 

Hundreds of thousands of federal workers will be unable to report for work on Monday, as the US Senate struggles to end a government shutdown.

 

The Senate held a rare session throughout the weekend to reach a compromise ahead of the working week, but the efforts failed late on Sunday. Monday morning many federal government offices will remain closed.

 

The following will show the roadblocks for each loan type:

 

1. FHA®
FHA® Loans WILL be affected, but not completely discontinued. There has been a lot of conflicting information about whether FHA® loans will stop during the federal shutdown and it has caused confusion. The current information supports that The Federal Housing Administration FHA® will continue to fund and underwrite loans but not fast enough to meet the current demand. Because private mortgage lenders process and underwrite a majority of FHA® and VA® loans and can process loans independent of the Department of Housing and Urban Development (HUD®) and FHA® there should be minimal roadblocks by the government slowdown. The last shutdown in 2013 a FAQ was posted to show how to work around some of the roadblocks and you may find this information useful for this time around.

 

2. USDA®  
USDA® will not be guaranty loans or issuing commitments. If USDA® did not already issue a conditional commitment, you will not be able to close until funding legislation is enacted.

 

3. Conventional Home Loans
Conventional loans including Fannie Mae® and Freddie Mac® should not be delayed unless your loan requires a 4506 as the IRS will not be processing these forms or Social Security verification. HARP® and HomePath loans should not be affected.

 

4.) Small business Administration Loans (SBA®)?

The SBA will not initiate new loan guarantees during the shutdown.

What if I can't get approved in time for my closing date?


It's possible the deal could fall through, but it's much more likely the contract will just be extended.

One thing that has changed since the last shutdown: The housing market is stronger than it was in 2013, and the volume of mortgage applications is higher. That means while the odds of any individual mortgage applicant hitting a roadblock would still be relatively small.

 

Government Agencies Affected
There will be over 2.2 million Government employees still working including those who provide essential services. Verifying information and processing mortgage paperwork isn't considered "essential." So those employees will stop working. The following is a list of agencies that will remain open during the shutdown.

  • About 1.4 million active-duty military personnel must remain on the job but won’t get paid until an agreement is made.

  • Active National Guard units also must continue to work.

  • TSA screeners will keep examining luggage.

  • Air traffic controllers

  • Food safety inspectors

  • NSA agents will keep monitoring phone calls.

  • Border patrol officers

  • Federal prison guards

  • FBI agents

  • Doctors and nurses at the VA and other federal hospitals,

  • Federal emergency and disaster relief workers.

  • The U.S. Postal Service, which is funded separately, would continue to deliver the mail.

Federal Reserve officials would continue working because they draw paychecks from funds generated by interest on the central bank's assets.

 

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