What Government Shutdown Means for REALTORS®
LOUISIANA REALTORS • January 8, 2019
As produced and published by the National Association of REALTORS® as of January 8, 2019
As of midnight on December 21, 2018, the President and Congress were unable to agree on the provisions of a Continuing Resolution (CR) to fund the federal government. As a result, a partial shutdown of some government operations has occurred. This partial shutdown includes some federal housing, mortgage and other programs of interest to the real estate industry. A summary of the impact on selected agencies is provided below. While this is a very politically dynamic event, NAR staff continue to monitor federal agencies and work with Congress, the Administration and other groups to assess ongoing impacts to NAR members and their businesses.
ENVIRONMENTAL PROTECTION AGENCY
CONTACT US
Under EPA's shutdown plan, most employees are now furloughed. This will affect various regulatory programs and compliance activities, such as wetlands determinations under the 404 program and enforcement of the lead-based paint disclosure and renovation, repair and painting programs.
FEDERAL HOUSING ADMINISTRATION
HUD’s Contingency Plan states that FHA will endorse new loans in the Single Family Mortgage Loan Program except for HECM loans. It will not make new commitments in the Multi-family Program during the shutdown. FHA will maintain operational activities including paying claims and collecting premiums. FHA Contractors managing the REO/HUD Homes portfolio can continue to operate. Some delays with FHA processing may occur due to short staffing (click here
for more info).
GOVERNMENT SPONSORED ENTERPRISES (GSES)
During previous shutdowns, Fannie Mae and Freddie Mac have continued normal operations since they are not reliant on appropriated funds. On December 26th both GSEs updated or clarified their loan purchase requirements in case of a shutdown. Freddie Mac requires all borrowers to sign a 4506T request form prior to close, but the request does not have to be processed prior to close. Fannie Mae requires the same unless the borrower’s income can be verified though Fannie Mae’s proprietary Desktop Underwriter verification system in which case no 4506T is required.
INTERNAL REVENUE SERVICE
The IRS will close and suspend the processing of all forms, including requests for tax return transcripts (Form 4506T). While FHA and VA do not require these transcripts, they are required by many lenders for many kinds of loans, including FHA and VA. Delays can be expected if the shutdown continues. Some loan originators may adopt revised policies during the shutdown, such as allowing for processing and closings with income verification to follow, as long as the borrower has signed a Form 4506T requesting IRS tax transcripts. On loans requiring a Form 4506T, see the GSE section above for additional details.
NATIONAL FLOOD INSURANCE PROGRAM (NFIP)
After NFIP operations were initially suspended over questions raised by government attorneys, NAR worked with the White House and Congress to clarify that the government shutdown does not affect the sale or renewal of flood insurance policies or the payment of claims on existing policies. Disaster relief, airport screenings and other essential homeland security functions are unaffected. Click here for the FEMA release resuming the full and normal operations of the NFIP.
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. Scheduled closings of Guaranteed Loans without the guarantee previously issued will be closed at the lender’s own risk.
VISA PROGRAMS - EB-5 AND H-2B
Until the shutdown ends and the Regional Center EB-5 program extension is signed into law, the EB-5 Immigrant Investor Regional Center Program is suspended and no new I-526 petitions can be filed. Investors must continue to file timely responses to USCIS Requests for Evidence (RFE) and Notices of Intent to Deny (NOID). In addition, investors may continue to prepare and file I-829 petitions. While the Department of Labor was funded for 2019, the Department of Homeland Security was not. Therefore, while the H-2B Temporary Worker Visa program is still operational for workers currently in the U.S., the DHS is unable to approve any new or returning workers under an H-2B visa.
FEDERAL GOVERNMENT SHUTDOWN SURVEY
An NAR survey
of 2,211 members found 75 percent had no impact to their contract signings or closings. However, 11 percent did report an impact on current clients and 11 percent on potential clients. If respondents reported an impact on current or potential clients, they were asked further details. Respondents were allowed to pick more than one response, as they may be working with more than one client. The most common impact, at 25 percent, was the buyer decided not to buy due to general economic uncertainty, though they were not a federal government employee. Among those impacted by the shutdown, 17 percent had a closing delay because of a USDA loan.
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Eric B. Landry, JD and Kristin E. Oglesby, JD Breazeale, Sachse & Wilson, LLP 301 Main Street, Suite 2300 Baton Rouge, Louisiana 70801 The following is a summary of the questions and answers from the 2024 Hotline. The Louisiana REALTORS® maintains a hotline for their Brokers to answer questions affecting the real estate industry as a whole. The hotline does not provide legal advice but provides general information. It is important to note that the laws and court decisions affecting these responses to these questions may change as new laws are passed and new court decisions are published. We cannot comment on or provide advice with respect to specific transactions. These responses are for general information only. Note that some of the responses provided herein were generated prior to the National Association of Realtors (“NAR”) Settlement going into effect. That is, on August 17, 2024, several practice changes affecting compensation and communication in residential real estate transactions went into effect. Please click on the link below to access a fully-indexed summary of the questions and answers from the 2024 hotline.
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