REALTORS® Help Reopen Key Programs as Shutdown Drags
January 15, 2019
Twenty-four days into the partial government shutdown—the longest in U.S. history—the impact on the real estate industry appears minimal, with many federal agencies that are crucial to the business operating normally. Applications for federally backed mortgages are being processed with no delay, FEMA is continuing to administer flood insurance, and in the latest move, the IRS reopened a home loan program vital for keeping closings on track. Still, that doesn’t mean a lengthier shutdown won’t cause ripples in the market, says National Association of REALTORS® Chief Economist Lawrence Yun, who calls the government closure “an unambiguous negative for real estate.”
NAR has played a role in getting briefly shuttered agencies and programs reopened, arguing successfully on Capitol Hill that lapses in flood insurance and delays in the mortgage approval process could scuttle thousands of purchase transactions nationwide. The association also was among several institutions that fought for the reinstitution of the IRS mortgage program, which processes forms that lenders use to verify borrowers’ income. “We were advised by various parties that the shutdown of [the Income Verification Express Services] was creating significant issues for certain borrowers,” a U.S. Treasury spokeswoman told The Wall Street Journal. “We are pleased to help taxpayers by ensuring this service continues despite the lapse.”
Mortgage giants Fannie Mae, Freddie Mac, and the Federal Housing Administration require the forms to be submitted to the IRS by the lender before the agencies will approve them. Without the forms, some loans were in jeopardy of stalling or being rejected.
The administration reopened the program by funding it through the user fees the IRS charges each time it verifies a borrower’s income, which are about $2 per request. Each week, the program processes about 400,000 forms from people trying to get a loan. The IRS also announced last week that despite the partial government shutdown, it will pay tax refunds this year.
After pausing on renewing and issuing flood insurance policies at the start of the shutdown in December, FEMA reversed its decision within days when NAR warned of the impact such a lapse would have on the real estate market. “NAR estimates up to 40,000 closings are disrupted each month that the NFIP cannot issue flood insurance policies,” Shannon McGahn, NAR’s senior vice president of government affairs, said at the time. Other groups, such as the National Association of Home Builders, joined NAR’s call to reinstitute the National Flood Insurance Program amid the shutdown, saying: “FEMA’s short-sighted action threatens to wreak havoc in many real estate markets from coast to coast at a time when the nation is already struggling through a housing affordability crisis.”
REALTOR® Magazine staff contributed to this report.
“IRS Reopens Key Program for Mortgage Loans,” The Wall Street Journal (Jan. 13, 2019) [Log-in required.]
Updated: August 22, 2019