Sad but true: when the government screeches to a halt, homeowners may feel the effects.
Government Shutdowns Impact Home Loans, Insurance, and Federal Aid
There’s a lot of news out there about what happens during a government shutdown. But we’re interested in how it could affect homeowners and those in the process of buying a home. For now, assume everything in here applies to the ongoing partial government shutdown of 2019 that started in December 2018; if we update this post to address future shutdowns, we’ll make note of that here.
There are several government services relevant to homeowners that could be impacted by a government shutdown. We’ll look at the following:
- Government-backed mortgage loans (FHA, USDA, and VA)
- Mortgage underwriting supported by Fannie Mae and Freddie Mac
- NFIP flood insurance
- FEMA disaster recovery aid
- HUD-backed home improvement loans
Effect of a Government Shutdown on Mortgage Loans
The federal government provides two main types of assistance for mortgages: loan insurance and actual mortgage loans. Both may be affected by the ongoing 2019 government shutdown.
FHA Mortgage Loans
The Federal Housing Authority (FHA) makes it easier for some first-time homebuyers to get a mortgage by offering mortgage insurance. An FHA-backed loan typically requires less money down than a standard loan. To mitigate the lender’s risk, the FHA supplies insurance on the loan (which the borrower pays for, typically wrapped into their monthly mortgage payments).
As of now:
- FHA-backed loans for single-family residences are still being financed.
- FHA home equity conversion mortgages (also called “reverse mortgages”) are NOT being financed.
- FHA Title I loans for home improvement projects are NOT being financed.
So if you’re looking for an FHA-backed mortgage to buy a home, you should still be able to secure it during the government shutdown.
There are two big caveats here, though: first, while the FHA is still operating, it is not currently fully staffed, so securing a loan may take more time than usual because backlogs are forming.
Second: there’s more to buying a home than securing a mortgage. Read on for how the shutdown might affect government branches responsible for mortgage-adjacent duties.
If you’re looking for an FHA-backed mortgage, you should still be able to secure it during the shutdown.