April 01, 2019
Impact of the 2018-2019 Government Shutdown on Mortgage Lending
The government shutdown that spanned from late December 2018 into late January 2019 had many widespread effects, which are still being calculated. Some of the 800,000 government employees affected, whether by furlough or by being required to work without pay, were integral to the housing market; as such there was some uncertainty in the marketplace due to the closure of players in the process of real estate transactions. This had an effect on mortgage lending.
Among these departmental closures were federal lending programs and certain programs related to mortgage origination and servicing. The Department of Housing and Urban Development, for example, was shuttered for the shutdown’s duration; its contingency plan allowed for the Federal Housing Authority to endorse single-family home loan originations, but there were no federally-backed reverse mortgage or property improvement loans included in this contingency plan, so none were undertaken during that time. The Department of Agriculture was similarly closed for the duration, leaving the Rural Housing Financing program unavailable to issue new guarantees or loans, and resulting in cancellations of previously-scheduled single-family guaranteed home loans—lenders were advised that should they continue to close such transactions during the shutdown that they were to assume the entire risk for doing so. Moreover, most lenders require identity and income verification through the IRS and SSA in order to process ordinary mortgages; these agencies were unable to provide such information during the shutdown due to lack of staff.
Full risk was also to be assumed by any federal contractors who continued work on FEMA contracts after the Agency issued a stop work order, informing them that any work done during the shutdown would not be reimbursed.
Veterans Affairs home loans continued unabated, however, because the VA was not subject to the shutdown.
Meanwhile, federal regulators via the FHA pleaded with lenders to make shows of leniency toward the unpaid government workers—including those who work for FHA, HUD and FEMA—during the shutdown, requesting they offer forbearance options, waive late fees, and that they suspend credit reporting for both the furloughed federal workers and contractors.
But for those who were able to continue with a home purchase during the shutdown, and for those who have been able to initiate a loan since it ended, Topouzis & Associates, P.C. has been here to act as a bulwark against title problems initiated in the past. We do title searches and ensure a buyer is gaining clear title to the new property—and we back our services with offerings of title insurance (click here), in case someone along the line of ownership did something that will weaken title at some point in the future.