By Mark Blazek, President
Greater Chattanooga Association of REALTORS®
As of the deadline for this week’s article, the government shutdown remains in effect and has an impact on federal housing and mortgage programs. While real estate transactions continue during the shutdown, in some cases they do so in an alternative, and possibly delayed manner. Here is what we know about some programs and departments related to real estate.
With the closing of the Social Security Administration (SSA) most customer service functions are suspended. This suspension affects real estate transactions in that lenders are unable to verify Social Security numbers as part of their regular loan approval process. Some lenders may be less likely to make loan commitments, if at all. Policies vary among lenders and some lenders may exercise forbearance during the shutdown period. For consumers it could mean that a lender approves their loan, but does so subject to subsequent verification. We do know that Fannie Mae and Freddie Mac have adopted policies that allow for a transaction to close subject to subsequent verification.
For the VA Loan Guaranty Program, lenders will continue to process and guaranty mortgages through the Loan Guaranty during the shutdown. However, processing delays are to be expected. The Federal Housing Administration (FHA) reports it will continue to endorse new loans in the Single Family Mortgage Loan Program. However, FHA will not make new commitments in the Multi-family Program during the shutdown. Operational activities (i.e., paying claims, collecting premiums) will continue; however due to a reduced staff, processing delays are to be expected.
New U.S. Department of Agriculture (USDA) loans definitely are affected by the shutdown. Those employees who issue conditional commitments, loan note guarantees, and modification approvals are not working during the shutdown. Thus, lenders will not receive new USDA approvals; however in some cases a lender obtained a conditional commitment prior to the shutdown. In that case, the lender may proceed to close the USDA loan during the shutdown.
The National Flood Insurance Program (NFIP) is funded by premiums, not tax dollars, and will not be impacted by the shutdown. The changes to the flood insurance program took effect on October 1, as scheduled. Also unaffected are Fannie Mae and Freddie Mac, as those enterprises do not rely on government appropriated funds.
The Department of the Treasury oversees the Making Home Affordable program, which includes the Home Affordable Modification (HAMP) and Home Affordable Foreclosure Alternatives (HAFA) programs. Both HAMP and HAFA are unaffected by the shutdown, as the Making Home Affordable program is funded through the Emergency Economic Stabilization Act, which mandatory, not discretionary, spending.
More details about the impact of the government shutdown on real estate can be found at www.realtor.org where the National Association of REALTORS® is posting updates.