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How Government Shutdowns Impact Housing
Posted On January 23, 2018
On Saturday, the US government shut down over a budget dispute, for the first time since 2013. Although the House of Representatives had approved a federal spending bill, many Senate Democrats opposed the bill because it did include funding for the Deferred Action for Childhood Arrivals (DACA) a program that prevents the deportation of approximately 800,000 undocumented immigrants brought to the US illegally as children. As of Monday afternoon, the Senate voted to reopen the government by advancing a stopgap spending bill that will keep the government open until February 8, 2018.
A government shutdown will impact many government agencies, like the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA). During a government shutdown, only 298 out of 7,797 reported HUD employees will be allowed to work. Ginnie Mae will also continue to operate, with a reduced workforce, down to 2 from the normal 143. The Office of Housing will go down to 86 employees from the usual 2,506 and the Office of Fair Housing and Equal Opportunity will go down to 2 employees from the usual 484. HUD reports the mortgage pipeline will stay open.
Government-sponsored enterprises Fannie Mae and Freddie Mac will continue to operate throughout the shutdown, since they are not reliant on the federal budgetary process for funding. The Department of Veterans Affairs (VA) will also continue to guaranty loans throughout the shutdown. Last time the government experienced an extended shutdown, in October 2013, about 17% of loan closings saw delays.
The National Association of Realtors (NAR) issued a statement, explaining that during a government shutdown, the Internal Revenue Service (IRS) may impact some FHA and VA loans. From the statement: “the IRS is closed and has suspended the processing of all forms, including requests for tax return transcripts (Form 4506-T). While FHA and VA do not require these transcripts, they are required by many lenders for many kinds of loans, including FHA and VA, so delays can be expected if the shutdown is protracted.”
The Consumer Financial Protection Bureau (CFPB) will continue to operate as normal, since its funding comes from the Federal Reserve. However, CFPB Acting Director Mick Mulvaney did not request continued funding from the Fed for Q2 2018, and instead plans to cover expenses with the CFPB’s cash reserves.
At this time, the government is funded through February 8, 2018. However, if budget disputes continue and a bipartisan deal is not agreed upon, another shutdown may take place.