Written By: Joel Palmer, Op-Ed Writer
The Department of Housing and Urban Development has released guidelines to lenders and borrowers regarding the services available during the government shutdown.
The federal government has been shut down for nearly a month. The impact has been felt in the housing and mortgage sector.
While HUD is closed during the shutdown, the agency put together a contingency plan. According to that plan, the Office of Single Family Housing will endorse new loans, with the exception of Home Equity Conversion Mortgages (HECM) and Title I loans. However, endorsements that require assessment by an FHA underwriter will not be able to be finalized during a lapse in appropriations.
“Because we are able to endorse most single family loans, we do not expect the impact on the housing market to be significant, as long as the shutdown is brief,” read a section in HUD’s guidelines to borrowers and lenders.
“With each day the shutdown continues, we can expect an increase in the impacts on potential homeowners, home sellers and the entire housing market. A protracted shutdown could see a decline in home sales, reversing the trend toward a strengthening market that we’ve been experiencing.”
HUD’s main warning is that, like most government agencies, it will have an extremely limited number of employees. “All HUD regional and field offices and HUD Headquarters will be closed with some limited exceptions for a very narrow range of activities that are permitted during a lapse in appropriations. In most cases, if you call or email the field office or Headquarters staff, you will hear a voicemail or receive a return email indicating that the Government is closed.”
According to the guidelines, below are some of the services and systems that are still available during the shutdown, as well as responsibilities that lenders must still follow:
•Lenders are able to obtain an FHA case number from the FHA Connection.
•Lenders with lender insurance can continue to insure loans during the shutdown. However, this will only last as long as FHA does not run out of commitment authority. If FHA runs out of commitment authority, lenders’ LI approval will be temporarily suspended.
•FHA will collect Upfront Mortgage Insurance Premiums if a lender closes a loan during the shutdown.
•Lenders are required to submit monthly Mortgage Insurance Premiums to FHA during the shutdown.
•Lenders can file a claim and convey a property. Properties will be assigned to an asset manager and listed for sale. Claims will be paid.
•Lenders are still required to file monthly default reports, as the reporting system will be available during the shutdown.
•Lenders are able to submit audited financial statements to the LEAP. However, FHA will be unable to review or process any audited financial statements.
In addition, the Credit Alert Interactive Voice Response System (CAIVRS) will be available. However, the information contained in the system may not be up-to-date.
HUD says that lenders wishing to continue originating FHA-insured loans during the shutdown should take reasonable steps to ensure compliance with the Debt Collection Improvement Act. Also, if CAIVRS is unavailable, FHA will accept the lender’s use of a current credit report to determine whether a borrower has any outstanding delinquent, Federal, or non-tax debt.
Actions that will not be available during the shutdown include:
•FHA will not approve condo projects during the shutdown.
•FHA will not approve lender applications until the shutdown ends. Also, FHA will not recertify lenders.
•FHA will not monitor lenders during the shutdown. The agency will not perform post technical endorsement or Quality Assurance Reviews.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.