What a Government Shutdown Means for REALTORS®
(As of January 14, 2019)
As of midnight on December 21, 2018, the President and Congress were unable to agree on the provisions of a Continuing Resolution (CR) to fund the federal government. As a result, a partial shutdown of some government operations has occurred. This partial shutdown includes some federal housing, mortgage and other programs of interest to the real estate industry. A summary of the impact on selected agencies is provided below.
While this is a very politically dynamic event, NAR staff continue to monitor federal agencies and work with Congress, the Administration and other groups to assess ongoing impacts to NAR members and their businesses.
Environmental Protection Agency
Under EPA’s shutdown plan, most employees are now furloughed. This will affect various regulatory programs and compliance activities, such as wetlands determinations under the 404 program and enforcement of the lead-based paint disclosure and renovation, repair and painting programs.
NAR Staff Contact: Russell Riggs, rriggs@realtors.org
Federal Housing Administration – UPDATE
HUD’s Contingency Plan states that FHA will endorse new loans in the Single Family Mortgage Loan Program except for HECM loans. It will not make new commitments in the Multi-family Program during the shutdown. FHA will maintain operational activities including paying claims and collecting premiums. FHA Contractors managing the REO/HUD Homes portfolio can continue to operate. Some delays with FHA processing may occur due to short staffing. Read more about these delays.
On Jan. 9, the FHA sent a letter urging seller/servicers to offer “special forbearance” to furloughed federal workers and contractors suffering a loss of income due to the government shutdown. In a letter to lenders, FHA Commissioner Brian Montgomery said servicers are reminded “of their ongoing obligation” to offer forbearance, citing the agency’s handbook. HUD also issued a press release (at the bottom of this email) reminding servicers to offer special forbearance options to borrowers affected by the shutdown. Montgomery also issued a short note that is included in the press release encouraging lenders “to waive late fees for affected borrowers and to suspend credit reporting on borrowers nationwide who have been affected by the shutdown.”
NAR Staff Contact: Sehar Siddiqi, ssiddiqi@realtors.org
Government Sponsored Enterprises (GSEs)
During previous shutdowns, Fannie Mae and Freddie Mac have continued normal operations since they are not reliant on appropriated funds. On December 26th both GSEs updated or clarified their loan purchase requirements in case of a shutdown. Freddie Mac requires all borrowers to sign a 4506T request form prior to close, but the request does not have to be processed prior to close. Fannie Mae requires the same unless the borrower’s income can be verified though Fannie Mae’s proprietary Desktop Underwriter verification system in which case no 4506T is required.
NAR Staff Contact: Ken Fears, kfears@realtors.org
Internal Revenue Service – UPDATE
As you may heard, the IRS has reopened the 4506T process. Here is what IRS announced:
“While the IRS remains closed during the partial government shutdown, on January 7, 2019, it will begin processing requests for transcript information made through Income Verification Express Service (IVES) program. Because it will take time to ramp this service up to normal operating status, it may initially take a few days to process these requests, as employees are brought back to work and begin to process requests backlogged since the funding lapse began on December 22, 2018. ”
NAR Staff Contact: Evan Liddiard, eliddiard@realtors.org
National Flood Insurance Program (NFIP)
After NFIP operations were initially suspended over questions raised by government attorneys, NAR worked with the White House and Congress to clarify that the government shutdown does not affect the sale or renewal of flood insurance policies or the payment of claims on existing policies. Disaster relief, airport screenings and other essential homeland security functions are unaffected. View the FEMA release resuming the full and normal operations of the NFIP.
NAR Staff Contact: Austin Perez, aperez@realtors.org
Rural Housing Programs – UPDATE
NAR has asked the Trump administration to provide relief to people whose Rural Housing Loan Program mortgage applications have been held up by the partial government shutdown. In a Jan. 16 communication, the association requested that the U.S. Department of Agriculture, which runs the Rural Housing Service, assign staff to process the loan applications as part of its plan to reopen Farm Service Agency offices temporarily during the shutdown.
The U.S. Department of Agriculture will not issue new rural housing Direct Loans or Guaranteed Loans. Scheduled closings of Direct Loans will not occur. Senior USDA officials advised us that the Rural Housing Service will not guarantee loans that do not have a conditional commitment issued before the loan is closed. USDA equated closing loans without a conditional commitment to the FHA Direct Endorsement program and USDA said they have issued no regulations, handbooks or audit procedures permitting that practice.
While some lenders may be considering GUS approval as tantamount to a conditional commitment, USDA reminded us that there are other steps in the USDA loan approval process (e.g. funding availability). They added that there is no precedent in the USDA program for guaranteeing loans that do not have a conditional commitment issued before the loan was closed.
As a reminder, USDA does permit a lender/borrower to close loans that already have a conditional commitment at their own risk. See p. 5 of the Rural Development Contingency Plan: www.usda.gov/sites/default/files/documents/…
NAR Staff Contact: Sehar Siddiqi, ssiddiqi@realtors.org
Veterans Administration (VA) Circulars on the Shutdown – NEW
VA has issued two new circulars concerning the shutdown.
Circular 26-19-1 – Servicing
VA encourages servicers “to extend forbearance to borrowers in distress as a result of Federal Government shutdown”.
Here is a link to the circular: www.benefits.va.gov/homeloans/documents/circulars/…
Circular 26-19-2 – Origination
VA describes measures regarding loan origination as a result of the shutdown. As long as the loan is current and you have been able to obtain all required documentation (pay-stubs, W-2s, VOEs, etc.) prior to guaranty, the loan remains eligible for guaranty.
Here is a link to the circular: www.benefits.va.gov/homeloans/documents/circulars/…
Visa Programs – EB-5 and H-2B
Until the shutdown ends and the Regional Center EB-5 program extension is signed into law, the EB-5 Immigrant Investor Regional Center Program is suspended and no new I-526 petitions can be filed. Investors must continue to file timely responses to USCIS Requests for Evidence (RFE) and Notices of Intent to Deny (NOID). In addition, investors may continue to prepare and file I-829 petitions.
While the Department of Labor was funded for 2019, the Department of Homeland Security was not. Therefore, while the H-2B Temporary Worker Visa program is still operational for workers currently in the U.S., the DHS is unable to approve any new or returning workers under an H-2B visa.
NAR Staff Contact: Russell Riggs, rriggs@realtors.org
Federal Government Shutdown Survey
An NAR survey of 2,211 members found 75 percent had no impact to their contract signings or closings. However, 11 percent did report an impact on current clients and 11 percent on potential clients.
If respondents reported an impact on current or potential clients, they were asked further details. Respondents were allowed to pick more than one response, as they may be working with more than one client.
The most common impact, at 25 percent, was the buyer decided not to buy due to general economic uncertainty, though they were not a federal government employee.
Among those impacted by the shutdown, 17 percent had a closing delay because of a USDA loan.
Courtesy the National Association of REALTORS®