A potential government shutdown in October could have significant implications for homeowners. If Congress fails to pass Continuing Resolutions (CRs) by September 30, 2024, many federal housing, mortgage, and regulatory programs could be affected, creating uncertainty for REALTORS® and their clients.
Here’s what a government shutdown could mean for key real estate-related agencies:
1. Federal Housing Administration (FHA)
- FHA will continue endorsing new loans in the Single-Family Mortgage Loan Program but may experience delays due to short staffing. However, no new commitments will be made in the Multi-Family Program.
- Borrowers can still obtain private flood insurance if the National Flood Insurance Program (NFIP) lapses during a shutdown.
2. Government Sponsored Enterprises (GSEs)
- Fannie Mae and Freddie Mac will continue normal operations, but some verifications (e.g., employment and social security numbers) could face delays, affecting loan processing.
- The IRS may stop issuing tax return transcripts, which are often needed for loan applications, potentially slowing down the closing process.
3. National Flood Insurance Program (NFIP)
- If the NFIP’s authorization lapses, no new or renewal flood insurance policies will be sold, although existing policies will remain valid until their expiration date.
4. Rural Housing Programs (USDA)
- The USDA will not issue new rural housing loans, which could delay closings for buyers relying on Direct or Guaranteed Loans.
5. Small Business Administration (SBA)
- New SBA loans, including the CDC 504 Loan Program and 7(a) Loan Program, will not be processed. This could affect buyers or businesses reliant on these loans for property purchases or business expansion.
6. Veterans Affairs (VA)
- The VA Loan Guarantee Service will remain operational but with limited staff, meaning potential delays similar to those of the FHA.
7. Environmental Protection Agency (EPA)
- Most EPA employees will be furloughed, leading to delays in regulatory programs such as wetlands determinations and enforcement of lead-based paint regulations.
Implications for REALTORS®
A past survey conducted by NAR revealed that 75% of REALTORS® reported no impact on contract signings or closings during previous shutdowns. However, 11% reported delays affecting their clients, with USDA loan closings most notably impacted.
In conclusion, while essential services such as postal operations will continue, REALTORS® and their clients could face significant delays and disruptions, particularly in loan processing and regulatory approvals. It is essential for REALTORS® to stay informed and plan accordingly to mitigate potential challenges.
Read the full guidance from the National Association of REALTORS®.
