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What Happens to RE if the Government Shuts Down?

No two shutdowns are the same, but the feds would be less responsive. Some RE products – FHA, VA and Rural Housing loans, flood insurance – may see an immediate impact.

ORLANDO, Fla. – The federal government’s fiscal year ends Sept. 30, and Congress has not yet approved an extension, with several lawmakers threatening to hold out. While a shutdown starting Oct. 1 isn’t imminent, it’s appearing more likely. Very generally, one of three things could happen:

  • Congress could pass a new budget at the last minute, the president signs it and nothing will change.
  • Congress could approve a short-term extension – some are talking about a 30-day one to Oct. 31 – that would keep the government operating at its current level while lawmakers continue to work out an agreement
  • The government could stop funding all agencies except those considered vital to the country’s operation

If the shutdown occurs, government-related real estate products could be affected. Homebuyers that need flood insurance as a requirement for their mortgage, for example, may not be able to secure new federal policies. It could also harm mortgages backed by the government, such as FHA, VA and Rural Housing loans if the federal employees who work in the background are temporarily unemployed.

In general, the shutdown affects all federal agencies, and each handles the new situation differently.

The length of a shutdown also comes into play. While the real estate industry might see little impact over the first few days, things tend to bog down over time if Congress fails to reach an agreement. The Office of Management and Budget (OMB) coordinates shutdown plans, and the plans get updated over time on a rolling basis.

The last shutdown occurred at the end of 2018 and lasted 35 days. Two earlier ones in 2018 didn’t last as long, and the government also shut down for 16 days in 2013.

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