How the Government Shutdown Could Affect Housing

from National Association of Homebuilders...interesting considerations...

Due to a dispute over border wall funding, President Trump failed to agree to a continuing resolution passed by the Senate that would have averted a partial government shutdown and kept the full federal government running through Feb. 8, 2019. House Republicans later passed a bill that included $5.7 billion funding for the wall, but the measure failed in the Senate.

As a result, roughly one-quarter of the government ran out of funding and was forced to close at 12:01 a.m. on Saturday, Dec. 22. The shutdown impacts several federal departments, including HUD, Agriculture, Commerce, Justice, Homeland Security, Interior, State, Transportation and Treasury.

One positive development and important victory for NAHB occurred when lawmakers agreed to extend funding for the National Flood Insurance Program (NFIP) for five months through May 31, 2019. NAHB pushed hard to make sure the program would not lapse and we continue to work with Congress to achieve a long-term reauthorization of the NFIP that will keep the program fiscally sound and let builders provide safe and affordable housing.

However, while the congressional intent was to keep the NFIP running for the next five months, FEMA on Dec. 26 notified insurers and insurance agents that it cannot sell or renew flood insurance policies backed by the program because of a lack of government funding. This means that new or renewing federal flood insurance policies will not be written.

NAHB is working with federal lawmakers to get more information and to attempt to resolve this issue.

While the shutdown will affect housing and home builders, it is still unclear how long it will remain in effect. In most cases, the short-run impacts will be minor. A long-term shutdown, lasting several weeks or a month or more, could have significant impacts on mortgage accessibility and reduce housing demand.

In general, NAHB members should expect delays for any housing-related federal government programs that are still operating and plan accordingly. NAHB continues to monitor the situation closely and is calling on federal lawmakers to act quickly to reach an agreement with the White House to fund the government.

Compiled by NAHB and based on the best information available at this time, the following is a list of government programs that could affect home builders and housing stakeholders under the current shutdown:

Department of Housing and Urban Development
FHA-insured single-family loans can still close during the shutdown but that decision will be determined by each individual lender. Contact your lender to verify.
Lenders will be able to obtain an FHA case number from FHA Connection, which provides FHA-insured lenders and business partners with direct, secure online access to HUD’s computer system. However, FHA staff will not be available to underwrite and approve single-family loans during the shutdown.
FHA multifamily insured projects with firm commitments and scheduled closings may go forward, although no new firm commitments will be issued.
HUD will make payments under Section 8 and Project Rental Assistance Contracts (PRACs) where there is existing budget authority, multi-year funding, or where there is budget authority available from prior year appropriations or recaptures. This includes processing Section 8 and PRAC renewals for expiring contracts and processing amendment funds for non-expiring Section 8 contract renewals.
No Real Estate Assessment Center (REAC) inspections.
CDBG, HOME and other block grant funds will be dispersed in cases where failure to address issues result in a threat to safety of life and protection of property.
Authorized drawdowns for approved CPD program activities (homeless assistance programs, CDBG, HOME, HOPWA) using pre-FY2018 program funds will continue uninterrupted unless it is necessary for a HUD employee to approve a voucher or lift a system edit prior to a draw down.

Department of Agriculture
Most Rural Development programs will not continue without appropriation.
The Section 521 Rental Assistance, Section 542 Rural Housing Vouchers, and Single Family Section 502 Guaranteed Loans will continue until funding is exhausted.
A shutdown of more than two weeks is likely to have a significant impact on rural development programs.

Department of Homeland Security
E-Verify, the Internet-based system that allows businesses to determine the eligibility of their employees to work in the U.S., is unavailable due to the government shutdown. While E-Verify is unavailable, employers will not be able to access their E-Verify accounts.

Small Business Administration
The SBA will not initiate new loan guarantees during the shutdown.

Department of the Interior
Businesses who seek permits from the Fish and Wildlife Service could be affected. New permits or applications currently under review will not be processed during the government shutdown, which will increase costs and delays.

Internal Revenue Service
Some lenders require home borrowers to file IRS form 4506-T to verify the mortgage applicant’s income and Social Security number. With the IRS shut down, this could result in major delays in some mortgage application approvals.
Taxpayer services will be suspended, meaning taxpayers will not be able to phone the IRS for advice and no refunds will be issued during an extended shutdown.

Economic Data
Future reports on items like the monthly jobs report, housing starts and new home sales could be postponed.

separately from the above article, here are a few other considerations from a real estate website called active rain.com:

IRS Tax Transcripts

Since the IRS may cease operations during a shutdown, obtaining a 4506T (request for tax transcripts) may become impossible. And most loans require these prior to being funded. When a shutdown occurs, we sometimes have a transcript in our file already, because it had been ordered and processed before the shutdown, but while the IRS is on ice, the strategy shifts to waiting until they re-open.

Social Security Administration (SSA) Verifications

Like the 4506T, many of our loans require verifications of social security numbers. Fortunately, past shutdowns have seen the SSA operate as usual.

FHA, VA and USDA Loan Processing

Recent experience has shown that the FHA and VA continue to operate during a shutdown, albeit with a skeleton crew. Turn times can be impacted and delays are to be expected. Conversely, the USDA has often closed entirely.

Verification of Employment (VOE)

Verifications of employment are required on most files and if the borrower is a government employee, obtaining this may be difficult or impossible until normal operations resume.