With the partial government shutdown now well into its third week, President Trump delivered a prime-time address to the nation last night from the Oval Office to lay out his case that the situation on the U.S.-Mexico border has reached a crisis level precipitating the need for his $5.7 billion request for border wall funding.
House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer delivered a joint response afterward stating that Democrats believe the wall is unnecessary and ineffective and that the White House should agree on other types of border security measures that were funded at previously agreed-upon levels with Senate Republicans.
The two sides remain deadlocked and it is still unclear how long the federal shutdown will remain in effect. A long-term shutdown, lasting several weeks or a month or more, could have significant impacts on mortgage accessibility and reduce housing demand.
NAHBNow previously reported about how the shutdown could impact the housing community. The closure affects several federal departments, including HUD, Agriculture, Commerce, Justice, Homeland Security, Interior, State, Transportation, and Treasury.
A Win on Flood Insurance
One positive development and important victory for NAHB occurred on Dec. 21 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 would have effectively halted all new or renewing federal flood insurance policies from being written.
NAHB led the charge to reverse this ill-advised decision from FEMA. Our efforts paid off when FEMA announced on Dec. 28 that NFIP insurers “may resume the sale, renewal, and monetary endorsements for flood insurance policies” effective since the program’s funding was renewed by Congress on Dec. 21. This is a critical victory for NAHB members.
The Situation Today
NAHB is monitoring developments closely and continues to call on federal lawmakers and the White House to act quickly to reach an agreement to reopen the government.
Compiled by NAHB and based on the best information available at this time, the following is an updated 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.
- The Office of Single Family Housing will not endorse Home Equity Conversion Mortgages (HECMs and also referred to as FHA reverse mortgages) during the shutdown.
- 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, as well as closings on final endorsements that have critical external deadlines.
- No new multifamily firm commitments will be issued.
- Owners of properties with FHA insured mortgages or 202/811 Capital Advances may submit requests for releases from their reserve for replacement accounts to cover funding shortfalls caused by non-payment of monthly rental subsidy.
- No Real Estate Assessment Center (REAC) inspections will occur during the shutdown.
- 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.
- HUD is confident it can pay Project-Based Section 8 contracts through February.
- Funding is also available for Housing Choice Voucher contracts through February. There may be a few first-time payments that are missed, but payments should be made through February for families under subsidy contracts
- 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 funding.
- A shutdown of more than two weeks is likely to have a significant impact on rural development programs.
- The Section 521 Rental Assistance and Section 542 Rural Housing Vouchers will continue until funding is exhausted. NAHB has heard from USDA that Section 521 Rental Assistance vouchers for multifamily properties will be funded through January and scheduled to paid in the first week of February.
- The Department of Agriculture will not issue new Single Family Section 502 Direct Loans or Guaranteed Loans during the shutdown. Guaranteed loans issued prior to the shutdown may or may not be closed, depending on your lender. Check with your lender to verify.
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
- On Jan. 7, the IRS resumed processing requests for tax transcripts made through its Income Verification Express Service program. Requests may take longer to process as the program ramps back up to normal operating status to handle the backlog that developed when funding lapsed on Dec. 22.
- 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.
- The IRS confirmed on Jan. 7 that it will begin processing tax returns on Jan. 28 and provide refunds to taxpayers as scheduled. Taxpayers must still comply with all IRS deadlines.
- Future reports on items like housing starts and new home sales could be postponed.
Finally, the entire federal rulemaking process for those agencies has been suspended during the shutdown, which means no proposed rules will be issued in the Federal Register and there will be no new proposals or finalized regulations. It is still not clear whether proposed rules and regulations that were in the pipeline will be rescheduled once the shutdown is over or whether deadlines will be extended to comment on proposed rules that already had specific closing dates.