Due to the government shutdown, many federal government offices remain closed, and a number of government programs, including some that impact federal housing and mortgage programs, are suspended or experiencing delays due to the lapse in government funding. REALTORS® say if the government shutdown is prolonged, it could hurt the housing market recovery.
“Since the IRS is closed, lenders cannot verify buyers’ incomes. Government-backed loans, including FHA loans, will be delayed. Delays in processing would ultimately stall home sales,” explained Carolyn Miller, president of the Silicon Valley Association of REALTORS®.
California Association of REALTORS® Vice President and Chief Economist Leslie Appleton-Young said if the shutdown continues there could be dire consequences. “We are operating in a global economy, where everything is interconnected. The greatest concern is if nothing is resolved by October 17 and Congress fails to raise the debt ceiling.”
If Congress fails to raise the debt ceiling, the nation would default on its debt. Mortgage rates would soar, housing affordability would drop, and potential buyers would pull back from the housing market, which is just recovering from the recession.
The Office of Management and Budget requires each agency to have contingency plans in place in the event of a government shutdown. The information below is based on the National Association of REALTORS®’ review of agency contingency plans.
Federal Housing Administration (FHA)
FHA will endorse new loans in the Single Family Mortgage Loan Program, but it will not make new commitments in the Multi-family Program during the shutdown. FHA will maintain operational activities, including paying claims and collecting premiums. Management & Marketing contractors managing the REO portfolio can continue to operate. Expect some delays with FHA processing.
VA Loan Guaranty Program
Lenders will continue to process and guaranty mortgages through the Loan Guaranty program, but expect some delays.
Flood Insurance
The National Flood Insurance Program will not be impacted by a government shutdown, since the program is funded by premiums and not tax dollars. Changes to the flood insurance program scheduled to take effect on Oct. 1 will be implemented as scheduled.
Rural Housing Programs
Lenders will not receive approvals for U.S. Department of Agriculture programs during the shutdown because field office staff who typically issue conditional commitments, loan note guarantees and modification approvals are on furlough due to the shutdown. If the lender has already received a conditional commitment from the Rural Development office, the lender may proceed to close those loans during the shutdown since the funds were already set aside. A conditional commitment, which is good for 90 days, is given to a lender once a USDA underwriter approves the loan.
Government Sponsored Enterprises
Fannie Mae and Freddie Mac will continue operating normally, as will the Federal Housing Finance Agency, since they are not reliant on appropriated funds.
Treasury
The Making Home Affordable program, including Home Affordable Modification Program (HAMP) and Home Affordable Foreclosure Alternatives (HAFA) program, will not be affected since the programs are funded through the Emergency Economic Stabilization Act, which is mandatory spending, not discretionary.
Internal Revenue Service
The IRS is closed and has suspended the processing of all forms, including tax return transcripts (Form 4506T), which are required for many kinds of loans, including FHA and VA, so expect delays.
Social Security Administration
The Social Security Administration is closed and has suspended most customer service functions. Verifying Social Security numbers through the SSN Verification Service will also be suspended during the shutdown, a further complication for mortgage processing.
Silicon Valley Association of REALTORS® says ... 