Government Shutdown Poses Few Problems for Lenders

Government Shutdown Poses Few Problems for Lenders 

By Brian Collins

SEP 30, 2013 6:07pm ET

With a government shutdown looming, it appears the mortgage industry will be mildly inconvenienced as most government mortgage programs will remain open. 

The Federal Housing Administration and Department of Veterans Affairs will continue to endorse loans while Congress feuds over the fiscal year 2014 budget and the debt ceiling. 

In addition, Ginnie Mae will continue to be fully operational and provide lenders with commitment authority to issue new pools. 

So FHA and VA lenders can continue to originate loans and continue to securitize those loans via Ginnie Mae. 

Late last week, FHA erred in issuing a statement that said it would not be able to endorse new loans. 

The agency issued a correction Monday. “The Office of Single Family Housing will endorse new loans under current multiyear appropriation authority in order to support the health and stability of the U.S. mortgage market.” 

FHA lenders that participate in the Lender’s Insurance program will continue to get loans endorsement electronically. The LI program is responsible for over 70% of FHA loans. Other FHA lenders will likely face delays since there will only be 67 FHA staff on hand to approve loans during a shutdown. 

The Veterans Benefits Administration issued Circular 26-13-20 to assure lenders that the VA will not be impacted by a shutdown. 

“The VA Home Loan Guaranty Program will continue to operate as normal in the event of a government shutdown. Lenders and servicers should continue their normal activities,” the VA circular says. 

Rural Housing lenders will not be so lucky, according to one lender. He noted that the Rural Housing Service will not be issuing new loan commitments if the government shuts down. 

Meanwhile, a government shutdown shouldn’t cause problems for Fannie Mae and Freddie Mac seller/servicers. The GSEs can continue to buy loans from lenders. 

Separately, Ginnie Mae posted this statement on its website: “In the event that the federal government does shut down, Ginnie Mae will continue to perform its critical and essential functions. These functions include monthly remittance payments to our mortgage-backed securities investors, publication of updated pool data disclosure, pool formation, issuance of new pools and release of commitment authority for lenders to issue new pools.”