Everything you need to know about how a government shutdown would impact homeowners and buyers if lawmakers cannot come to a federal-spending conclusion by new March deadlines.
What is a government shutdown?
Once again, Congress was able to narrowly avoid a government shutdown by approving a temporary funding bill to keep U.S. government agencies open, shifting new deadline dates to March 8 and March 22. This “continuing resolution” will fund the Departments of Transportation, Agriculture, Housing and Urban Development, and Veterans Affairs, until March 8. Other federal agencies will receive funding until March 22.
Before these deadlines, the U.S. federal government must pass appropriations bills to fund government operations for the next fiscal year. If lawmakers cannot pass the 12 appropriation bills needed to fund the government before these new deadlines, federal agencies must stop all non-essential functions until Congress acts, which is known as a government shutdown. If Congress passes some of the appropriations bills, only agencies without appropriations must shut down which is known as a partial shutdown.
A government shutdown impacts federal programs that homeowners and buyers rely on. With the possibility of a full or partial shutdown in the coming months, we’ve compiled a list of potential impacts on federal loans and insurance, with resources to help you navigate a shutdown should it occur.
Federally Backed Mortgages
About half of today’s mortgages are federally backed, many of which are utilized by low-income and first-time home buyers. Each federal lender has historically been impacted by government shutdowns differently:
U.S. Department of Housing and Urban Development: Federal Housing Administration and Ginnie Mae
The Federal Housing Administration will continue to insure single-family loans (except reverse mortgages and Title 1 loans) during a government shutdown. Loan processing times could be delayed due to agency staffing limitations as a result of a shutdown. More information on the U.S. Department of Housing and Urban Development’s processes during a government shutdown can be found here.
Ginnie Mae will also continue to operate during a government shutdown, however staffing limitations may cause delays in response times. Click here for frequently asked questions regarding Ginnie Mae’s functions during a federal funding lapse.
U.S. Department of Housing and Urban Development Services
The U.S. Department of Housing and Urban Development’s Headquarters, regional and field offices will close for the duration of a government shutdown, with limited staff available to answer questions or concerns. In the event of an emergency, state or city housing offices can often provide referrals to local providers. Click here for more information. Currently, the U.S. Department of Housing and Urban Development is funded through March 8.
U.S. Department of Agriculture
The U.S. Department of Agriculture (USDA) does not issue new loans or grants during government shutdowns. Although lenders may close loans with outstanding commitments, the USDA cannot guarantee these loans until employees return to work. Click here for more information on the USDA’s operational procedures during a federal funding lapse. Currently, the U.S. Department of Agriculture is funded through March 8.
Department of Veteran Affairs
The Department of Veteran Affairs continues to process VA loans during government shutdowns. This means your loan application or payout should not be impacted by a government shutdown. More information can be found here. Currently, the Department of Veteran Affairs is funded through March 8.
National Flood Insurance
The Federal Emergency Management Agency (FEMA) recently announced that its National Flood Insurance Program (NFIP) will not be able to issue new policies if it’s authorization lapses as a result of a government shutdown. The NFIP will continue to pay out valid claims until funding depletes, but if the program runs out of funds before new legislation is agreed upon, no new policies can be written and existing policies cannot be renewed. Currently, the NFIP is funded through March 22.
Home sales in some areas could be impacted by an NFIP authorization lapse, as many mortgage companies will not approve loans without flood coverage. But even though the NFIP is the most commonly used flood insurance program, homeowners and future buyers may have other options; private flood insurance companies also offer coverage that would not be impacted by a government shutdown. Learn more about private flood insurance options here.
About the American Property Owners Alliance
The American Property Owners Alliance (The Alliance) is a nonpartisan, non-profit organization created to protect and support property owners and pave the way for future property owners. Our mission is to educate property owners about federal issues, laws and policies; to advocate for owners’ rights and interests; and to mobilize, when necessary, to secure those rights and interests.
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