How will the Federal Government Shutdown impact real estate sales?
With hours left until the possible Federal Government shutdown my clients are asking me how this could impact their ability to buy, or sell their house. Since the Federal Government provides numerous services affiliated with the real estate industry I have written out how some of the programs will be impacted below:
Federal Housing Administration (FHA)
FHA cannot offer endorsements for any new loans in the Single Family Program and cannot make commitments in the Multi-family Program in the event of a shutdown. FHA will maintain operational activities including paying claims and collecting premiums. If clients we going to use an FHA loan that process looks like it will be on hold or delay during the shutdown.
VA Loan Guaranty Program
Lenders may continue to process and guaranty mortgages through the Loan Guaranty program in the event of a government shutdown. VA loans seem to be unaffected by the shutdown.
Internal Revenue Service (IRS)
Should the federal government shut down, the IRS cannot process federal income tax returns or issue refunds (but it can deposit tax payments). Consumers who were expecting to use their tax returns as part of the down payment for a home purchase will temporarily not have access to these refunds. Just because the IRS can not pay your refund dose not mean they can not cash your Tax payment. Taxes are still due on April 15.
The Federal Emergency Management Agency (FEMA) confirmed that the National Flood Insurance Program (NFIP) will not be impacted by a government shutdown.
Rural Housing Programs
For the US Department of Agriculture programs, essential personnel working during a shutdown do not include field office staff who typically issue conditional commitments, loan note guarantees, and modification approvals. Thus, lender will not receive approvals during the shutdown. If the lender has already received a conditional commitment from the Rural Development office, then the lender may proceed to close those loans during the shutdown. A conditional commitment, which is good for 90 days, is given to a lender once a USDA Underwriter approves the loan. If a commitment was already issued, the funds were already set aside and the lender may close the loan at its leisure. If Rural Development has not issued a conditional commitment, the lender must wait until funding legislation is enacted before closing a loan.
Government Sponsored Enterprises
Fannie Mae and Freddie Mac will continue operating normally, as will their regulator, the Federal Housing Finance Agency. These two agencies will continue to back loans and therefore conventional financing should continue as normal.
Making Homes Affordable Program
No official word as of yet, but the Making Home Affordable program, including HAMP and HAFA, may not be affected as the program is funded through the Emergency Economic Stabilization Act which is mandatory spending not discretionary.
Contact me if you have additional questions about how the shutdown could impact your ability to sell your home or buy a new one!