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Thinking about buying your first home but overwhelmed by mortgage news, rising rates, and confusing headlines? The Mortgage Research Network Podcast is your no-fluff, data-backed guide to the housing market. We break down the latest trends, stories, and research from MortgageResearch.com into simple, clear insights you can actually use. Hosted with first-time buyers in mind, each episode helps you understand what’s happening in the market and how to use that knowledge to make smarter decisions, from locking in a great rate to choosing the right time to buy. Empowering you with the facts, confidence, and tools to become a homeowner one episode at a time.
Welcome to the Mortgage Research Network Podcast. This podcast brings you the latest in mortgage and real estate news 3 times a week. The audio is AI generated, but content is fact-checked by me, Tim Lucas, editor of MortgageResearch.com and a former mortgage professional. This week we're talking about the S word. No, not that S word. We're talking "shutdown".
The U.S. government entered a shutdown on October 1st when Congress failed to authorize new funding, marking another period of suspended government services. While most shutdowns historically last just a few days with minor disruptions, the 2019 shutdown set a concerning record at 35 days. Despite eleventh-hour negotiations between party leaders at the White House, no compromise materialized, leading to the furlough of hundreds of thousands of civil servants and the closure of non-essential government services.
This shutdown significantly impacts the mortgage industry, affecting various loan types differently. While private-sector lenders continue operations, they face indirect challenges. Common verification processes, such as obtaining IRS tax transcripts through Form 4506T and social security number verification, are stalled as these government offices close. Employment verification becomes particularly problematic for federal workers, as furloughs leave no staff available to confirm employment status.
For conventional loans, including those through Fannie Mae and Freddie Mac, processing continues but with notable delays. These loans require tax transcripts, social security verifications, and flood insurance documentation, all of which face disruption during the shutdown. While these hurdles typically slow rather than stop applications, they can significantly extend processing times.
FHA loans face additional complications under the Department of Housing and Urban Development's limited operations. While regular FHA loans can still close, several services face disruption, including reverse mortgages, Title I loans, and condo project approvals. The FHA Resource Center remains operational but with reduced staffing, potentially delaying complex loan scenarios that require expert consultation. Post-closing processes, including foreclosures, may cease entirely during the shutdown.
VA loans maintain some functionality, with the Department of Veterans Affairs continuing to insure loans during the shutdown. However, reduced staffing and limited support functions may cause delays. Veterans can still request certificates of eligibility electronically, but those needing Form DD-214 documentation may face extended waiting periods until the government reopens.
USDA loans experience the most severe impact among all loan types. The Department of Agriculture typically suspends issuing new mortgages and postpones closings on existing applications until the shutdown ends. Unlike FHA and VA loans, USDA loans require direct government office approval before closing, making them particularly vulnerable to shutdown effects. When offices eventually reopen, substantial backlogs can further delay processing.
The shutdown also affects flood insurance requirements for property purchases. The National Flood Insurance Program, administered by FEMA, cannot issue new policies during the shutdown, though existing policies remain active and claims continue to be processed. While private sector flood insurance remains available, increased demand during shutdowns typically slows policy issuance.
Furloughed federal workers face unique challenges in the mortgage process. Most loans require employment verification shortly before closing, often even the day of funding. Even if verification is possible during the shutdown, confirmation of furlough status typically prevents closing until regular work resumes. Lenders generally won't proceed with closings for furloughed workers until they return to active employment status.
For mortgage applicants affected by these delays, options are limited but not nonexistent. The most important step is maintaining open communication with all involved parties like real estate agents, lenders, and other stakeholders. Sellers typically understand that government-caused delays are beyond buyers' control and are often willing to extend closing dates. For those just beginning the mortgage process during a shutdown, there might be an unexpected benefit: mortgage rates sometimes decrease during these periods.
The shutdown's impact varies significantly depending on loan type and specific circumstances, with conventional loans facing moderate delays while government-backed loans, particularly USDA loans, experience more severe disruptions. Success during this period requires patience, clear communication, and understanding of how different loan types are affected by the shutdown. To learn more, type government shutdown into the search bar at Mortgage research.com.