The National Association of Realtors (NAR) has recently released a report detailing the potential impact of a government shutdown on the real estate industry and the economy as a whole. If Congress fails to agree on a Continuing Resolution (CR) to fund the federal government by September 30, 2023, it will result in a partial shutdown of certain government operations.
The partial shutdown will affect various federal housing, mortgage, and other programs that are of interest to the real estate industry. However, essential services such as the post office will continue to operate. The report provides a summary of the impact on selected agencies:
Environmental Protection Agency (EPA): Under EPA’s shutdown plan, most employees will be furloughed. This will affect various regulatory programs and compliance activities, including wetlands determinations and enforcement of lead-based paint disclosure and renovation programs.
Federal Housing Administration (FHA): According to HUD’s Contingency Plan, FHA will continue to endorse new loans in the Single Family Mortgage Loan Program, except for HECM and Title 1 loans. However, new commitments will not be made in the Multi-family Program during the shutdown. FHA will maintain operational activities such as paying claims and collecting premiums.
Government Sponsored Enterprises (GSEs): Fannie Mae and Freddie Mac, which are not reliant on appropriated funds, have continued normal operations during previous shutdowns. However, there are some considerations regarding verification of employment, tax transcripts, verification of social security number, and proof of flood insurance coverage application.
Internal Revenue Service (IRS): The IRS has not yet released its shutdown contingency plan, but in past shutdowns, only employees whose duties protect the government were allowed to remain on the job. Taxpayers can expect delays in services such as issuing tax refunds and answering calls.
National Flood Insurance Program (NFIP): During a lapse of authority, the NFIP may not sell new or renewal flood insurance policies. Existing policies will remain in effect until their expiration date, and claims will continue to be paid until funds run out. Private market flood insurance is also an option.
Rural Housing Programs: The U.S. Department of Agriculture will not issue new rural housing Direct Loans or Guaranteed Loans. Scheduled closings of Direct Loans will not occur, and lenders will close Guaranteed Loans at their own risk if the guarantee has not been previously issued.
Veterans Affairs (VA): The VA has not yet released its contingency plan for a government shutdown, but in previous shutdowns, the Loan Guarantee Service remained operational with a limited staff. Delays in processing can be expected, similar to the FHA.
Small Business Administration (SBA): The SBA will not process new loans or approve routine small-business loans during the shutdown. However, already approved loans will be closed, and limited loan servicing and liquidation activities will continue. The SBA will also continue to issue Disaster Loans if needed and process Paycheck Protection Program loan forgiveness applications.
Visa Programs – EB-5 and H-2B: The EB-5 program, which receives government funding, will continue to operate as its current operations are authorized through September 30, 2027. However, delays may occur due to staffing shortages in other agencies. The processing of H-2B visas and other DOL Office of Foreign Labor Certification operations will cease.
Delays in Agency Regulations: As the government will only be running essential services, other agency actions such as publishing proposed and final rules are expected to be delayed. For example, the release of a notice of proposed rulemaking on anti-money laundering regulations for the real estate sector by the Financial Crimes Enforcement Network (FinCEN) may be delayed.
These potential impacts highlight the importance of a timely agreement on a funding resolution by Congress to avoid disruption in the real estate industry and other sectors. To read the full report and gain more insights into the potential impact, you can click on the provided link.