Lew Sichelman
Thousands of federal employees, and the millions of families who rely on government services, are facing financial uncertainty because of the government shutdown. Experts are weighing in on how this affects renters and homeowners.
“No one should lose their home because of a crisis they did not cause,” said David M. Dworkin, president and CEO of the National Housing Conference, in a recent statement from the nonprofit.
If the shutdown directly affects you, there is help out there, but you have to be proactive. You can’t just sit there, trying to ride it out all by your lonesome.
For starters, pay this month’s rent or mortgage right away.
“Even in times of uncertainty,” reads the NHC statement, “making current payments helps avoid compounding financial strain.”
If the shutdown continues into next month and you’re unable to make that payment, contact your landlord or lender right away. Let them know your situation so you can devise an alternative plan.
“Open and early communication is essential,” said the NHC.
Forbearance Available from Servicers
Perhaps you can work out a plan to repay what you owe when you return to the job. Once Congress does approve a budget, federal workers are usually paid for the time they could not work. Contractors don’t enjoy that luxury, though. Time lost is money they can’t get back.
Families living in assisted housing will continue to have their rental payments covered through November, according to a statement from Renee M. Willis, president and CEO of the National Low Income Housing Coalition.
For those who can’t make their mortgage payments, Fannie Mae and Freddie Mac have directed loan servicers – the companies that administer loans on behalf of their owners – to “assist borrowers affected by the shutdown, reminding them that they are authorized to offer forbearance plans when needed,” said the NHC.
Forbearance can take many forms: Your payments can be forgiven for the present, but added to the balance owed. Or you may be allowed to make smaller payments – again, with the difference added to your loan amount. Once the forbearance period ends, you’ll be required to bring the loan current or refinance – or face possible foreclosure.
Credit Unions Offering Help
If the shutdown drags on and you need cash to carry you over, several federal employee-based credit unions stand ready to help.
Navy Federal’s Paycheck Assistance Program “offers a 0 percent APR loan to eligible federal employees or contractors impacted by the shutdown,” said the NHC. The loan amount is based on the borrower’s monthly pay.
Congressional Federal is offering a suite of solutions, including a 0 percent APR relief line of credit for 60 days, which then turns into a 4 percent loan with fixed monthly payments for 36 months. And PenFed is offering several furlough assistance options, including “no-interest loans equal to your payroll direct deposit.”
Most Mortgages Moving More Slowly
If you are in the process of winning approval for a mortgage, your application is likely to continue moving forward during the shutdown. But it may move at a slower pace, especially if your loan is insured or guaranteed by Uncle Sam.
The Department of Housing and Urban Development reports that while loans backed by the Federal Housing Administration will continue through the approval and processing tracks, delays could be caused by reduced staffing and other limitations. But the FHA has indicated it cannot respond to most correspondence during the shutdown, nor will it endorse reverse mortgages or Title I loans, which allow borrowers to roll the cost of repairs into their mortgages.
Here, communication with your servicer – the company that collects your payments – is key.
“Communication is the most important tool renters and homeowners have right now,” said Dworkin.
Conventional lenders are under no restrictions. But if you are a government employee and your loan will be sold to Fannie Mae or Freddie Mac, verifying your employment may be a little tricky. Obtaining tax returns from the IRS to verify income, validating your Social Security number and obtaining federal flood insurance also could prove difficult.
NFIP Won’t Issue New Policies
Fannie said it will accept verbal employment verifications, or even waive that requirement, if the lender states an electronic confirmation could not be obtained because of the shutdown. It also said it is abridging its rules about income and Social Security number authentication.
Fannie also is waiving the requirement that your most recent pay stub be dated no earlier than 30 days prior to the initial loan application. But if the shutdown extends for a longer period, borrowers will have to have two months’ worth of documented reserves.
With the shutdown, the National Flood Insurance Program’s authority to issue new policies has lapsed, complicating some 1,400 property transactions daily, said the National Association of Realtors. Unless they find a private flood insurer, borrowers in high-risk areas could be left without coverage.
Lenders have been advised by the Federal Reserve’s Board of Governors that even during the NFIP lapse, they may keep writing loans that are subject to federal flood insurance statutes. However, they must “continue to make flood determinations [and] provide timely, complete and accurate notices to borrowers,” reads a statement from the Fed Board.
Existing NFIP policies will remain in effect until their expiration dates, and claims will continue to be paid until the funds are depleted.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.
