With Congress failing to approve funding for government operations by the September 30 deadline, causing a partial government shutdown that is still in effect, many, but not all, government programs, including some that impact federal housing and mortgage programs, have been suspended or slowed due to the lapse in government funding. The following is the continuation of last week’s article providing a summary on how key agencies and programs are expected to operate during a shutdown from the National Association of REALTORS®.
Internal Revenue Service: While the IRS has not yet released its shutdown contingency plan, in past government shutdowns the agency has consistently held that its employees can remain on the job during shutdowns only if their duties protect the government. For example, during the 2018 closure, the roughly 12 percent of employees who were required to report to work could open mail only in search of checks payable to the government and were not allowed to answer taxpayer phone calls, issue tax refunds, release liens and levies or perform most other taxpayer services.
National Flood Insurance Program (NFIP): During a lapse of authority, the NFIP may not sell new or renewal flood insurance policies. Existing NFIP policies will remain in effect until their expiration date, and claims will continue to be paid until funds run out. NFIP policies may be assigned from seller to buyer during a lapse, and most lending regulators have issued guidance providing flexibility. Private market flood insurance is also an option.
Rural Housing Programs: USDA will not issue new direct loans or guaranteed loans, and scheduled direct loan closings will not take place. Pending conditional commitments for guaranteed loans will be reviewed and, if possible, USDA may issue the loan note guarantee. Guaranteed loan closings without a previously issued guarantee may still proceed, but only at the lender’s risk. Disbursements on existing construction loans may continue when necessary to protect USDA’s property interests. All pending loan servicing actions, including guaranteed loss claims, must be documented and secured to allow for timely processing after the shutdown ends. Rental assistance will continue only if a threat to USDA's property interests becomes imminent (after 30 days), and funding remains available under existing rental assistance agreements.
Veterans Affairs: The Department of Veterans Affairs (VA) will continue to guarantee home loans during a government shutdown, and lenders may keep processing applications. However, some VA staff and support functions may be reduced, which may slow down approvals, appraisals, and certificate of eligibility requests. Veterans seeking a new loan or refinance should check with their lender for updated processing times during an extended shutdown.
Small Business Administration: During the shutdown, the SBA will not process new loans or approve routine small-business loans, including the CDC 504 Loan Program and the 7(a) Loan Program; however, the agency will continue to close previously approved CDC 504 Loans and carry out limited loan servicing and liquidation activities.
The Office of Advocacy will also cease operations. The SBA will continue to issue Disaster Loans should the need arise.
Lauren Bunting is a Broker with Keller Williams Realty of Delmarva in Ocean City, Maryland.
