The federal government is officially on shutdown. Dictionary.com defines a shutdown as to cease or cause to cease operations. Well, it would seem to me that anything related to mortgage lending and the federal government would be out of operation until Congress agrees on something – and considering how likely that is to happen based on the track record of these lawmakers that could be awhile.
It’s tough to be memberlicious when the government is so involved in mortgage lending, but fortunately it’s not a total shutdown. Read on to find out how this will impact your ability to help members with home loans.
First the good news….
FHA – According to HUD’s web site and despite varying media reports, FHA lending will still be available during the shutdown. You can read all sixty plus pages here. Here’s the important stuff (or you can read Appendix B starting on page 48). HUD will still be issuing FHA case numbers through FHA Connections so you can keep taking FHA applications. And as long as you or your lending partner are fully approved with HUD, you will be able to get underwriting decisions. If you are in a test period, you’re probably stuck as HUD will not be underwriting files. There will be some telephone support as HUD expects to keep about 10% of its employees working during the shutdown. But don’t expect a quick answer on the phone or to get a condo project approved. The other issue is that if the shutdown is prolonged you may have issues getting your insurance as you must file for the insurance within 60 days of loan closing.
VA – Loans through the Veterans’ Administration will continue as usual during the shutdown.
USDA – USDA rural housing lending will be suspended during the shutdown. So hopefully you live in a metro area if you want to keep helping members with home ownership. Otherwise, you’ll have to wait for them to come back to work to underwrite files.
Fannie & Freddie – So apparently if you are a private company that is controlled by the government through conservatorship the shutdown doesn’t apply to you. It’s business as usual with our friends at Fannie & Freddie. Hopefully, they will keep making a ton of money and maybe the government will be able to stay afloat.
Ginnie Mae – Ginnie will keep close to 40% of its small workforce active during the shutdown. This is primarily to make sure investors get their payments on GNMA securities and to form new mortgage pools. So that’s good news for GNMA issuers.
GSE Reform – Despite the gaining momentum in Washington, GSE Reform efforts will most likely come to a grinding halt. Congress has bigger issues such as having money to run the government and reaching the debt ceiling around mid-October.
So that’s a quick summary of how the so-called “shutdown” will impact the US government’s involvement in mortgage lending. Not good. But not as bad as it could be. It will surely impact some borrowers’ ability to get a loan so my recommendation to you is to communicate, communicate and then communicate some more. Tell your members what’s going on and be sure to keep your Realtor base informed as well. And then hope we can get the Democrats and the Republicans to play nice for a couple of days and solve this issue or at least put a band-aid on it so we can go back to being memberlicious.