How a Government Shut Down Affects the Real Estate Industry
First the History- In US Politics, a government shutdown occurs when Congress fails to pass or the President refuses to sign appropriations legislations funding federal government operations and agencies. In this case, the current interpretation of the Antideficiency Act requires that the federal government begin a “shutdown” of the affected activities involving the furlough of non-essential personnel and curtailment of agency activities and services, however essential employees are still required to work without pay until the government reopens, examples of essential employees include medical professionals in the Veterans Hospitals and TSA agents. Since 1976, when the current budget and appropriations process was enacted, there have been twenty gaps in budget funding, eight of which led to federal employees being furloughed. Prior to 1990, funding gaps did not always lead to government shutdowns, but since 1990 the practice has been to shut down the government for all funding gaps. Shutdowns have also occurred at the state, territorial and local levels of government. The last major shut down was in 2013 and lasted for 16 days (and there were many before that).
Here is what we know as of now
1) Because a spending bill was not passed by midnight Friday night, some government agencies are shut down and staff is furloughed until funding is available
2) Agencies that ARE impacted include; IRS, USDA, SSA, NFIP, and HUD/FHA
3) Agencies that are NOT impacted by a shut down include; FNMA/FHLMC, GNMA, & VA. Should be business as usual here.
The specific impacts to the agencies noted above in #2 are:
IRS
· Tax Transcript services would not be available. In the event of an extended shut down, each lender will look at their transcript requirements on Agency Direct (FNMA, FHLMC, VA, FHA) loan programs. In addition, each lender will be watching updates from investors for any latitude they may offer.
USDA
· We have confirmed directly with the USDA national office, that within two days of the shutdown they will begin furloughing staff.
· GUS (USDA’s AUS system) will remain available.
· Loans with a conditional commitment already issued by a RHS office before the shutdown will be able to close as normal.
· Loans that have not been reviewed by RHS staff and did not have a conditional commitment issued before the shut down will NOT be reviewed until after the shut down. This will impact closings as lenders cannot close a USDA loan without the conditional commitment issued.
· Loans that have already closed but have not obtained the loan note guarantee prior to the shut down will also have that process delayed, potentially impacting secondary market operations.
SSA (Social Security Administration)
· Third party vendors used to verify social security numbers may not receive responses from SSA during a shutdown. This has the potential to impact closings depending if there are specific alerts on the credit file.
· Borrowers may not be able to obtain income benefit information in a timely manner during the shut down. This has the potential to impact closings.
NFIP (National Flood Insurance Program)
· The NFIP will not issue new flood insurance policies during the shut down. Loans using programs where the property is in a flood zone and those programs require an NFIP policy, and that policy was not issued prior to the shut down WILL be impacted.
· Loans on programs where private flood policies are permitted may not be impacted as private flood insurance companies will be able to issue policies.
FHA
· Most functions at FHA will continue even with staff furloughed, FHA connection will remain available, TOTAL Scorecard, CAIVRS and Lender Insuring will all remain available presuming no technology glitches.
· Systems and functions that will NOT remain available are:
o Endorsements on HECM/Reverse mortgages
o Homeownership Center staff will be fuloughed so they will not complete HRAP condo project approvals that have been submitted. They recommend holding all submissions until the shut down is over
Here is an article from NAR: https://www.nar.realtor/what-a-government-shutdown-means-for-realtors
Thank you for all of your support in 2018 and we are looking forward to an amazing 2019 serving you, your friends and family!
Here’s 7 Ways to Reach Us!!!
Team Hotline: 480-420-7107
Text/Cell: 602-820-5166
Website (and a great place to apply): www.SandyKrestan.com
Facebook Message: facebook.com/sandykrestanmortgageplanner
Sincerely,
Sandy Krestan
The Krestan Team at Fairway Independent Mortgage
Certified Mortgage Planner
NMLS 153369
Mobile/Text (602) 820-5166
My Team Line (602) 820-5166
