While We Were Away: Update on Government Shutdown, Other Key Issues

MBA NewsLink took a break last week (we hope you did, too); the news, of course, did not. Here’s a summary of what happened–and didn’t happen–while we were away.

Government Shutdown in 2nd Week
A standoff between the Trump Administration and Congress over funding for a border wall entered its second week amid rapidly changing dynamics.

For a complete list of how the government shutdown could affect you, MBA has prepared a Fact Sheet, available at http://mba-pc.informz.net/mba-pc/data/images/Government_Shutdown_Implications.pdf.

The House and Senate had approved a continuing resolution to keep the government opened through February, but President Trump–after first indicating that he would sign the bill–changed his mind and said he would not sign any CR without the full $5 billion in wall funding he originally demanded. The House passed a new resolution with the wall funding, but the Senate failed to approve a similar bill.

Without resolution, roughly 25 percent of the federal government–including HUD, the Commerce Department, the Federal Emergency Management Agency and the Department of Homeland Security–shut down on Dec. 22. Over the holidays, the House and Senate met in pro forma sessions but did nothing to resolve the issue.

Which brings us to today. With Democrats taking over the House on Jan. 3, they gain leverage with the Administration in approving any wall funding beyond the $1.6 billion already agreed upon–something expected House Speaker Nancy Pelosi, D-Calif., said isn’t going to happen. Trump appears to be digging in his heels as well. Ultimately, public pressure will likely determine how long the standoff continues.

On Thursday, the House is expected to pass a new bill funding the government through Feb. 8, without the $5 billion in wall funding; Senate passage is uncertain, and Trump’s rhetoric suggests he is digging in his heels as well. Late yesterday, however, Trump invited House and Senate leaders to a meeting at the White House, suggesting (for the moment) that he’s “open to a deal.”

FEMA Reverses, Will Issue New Policies During Shutdown
The Federal Emergency Management Agency, after first announcing the National Flood Insurance Program could not issue new policies during the shutdown (despite authorization through May), reversed itself this week and said it would issue such policies after all. FEMA will also continue processing flood damage claims.

The original FEMA guidance on Dec. 26 drew a response from MBA President and CEO Robert Broeksmit, CMB. “I respectfully ask officials at FEMA to reconsider their decision not to issue new NFIP policies or renew existing policies during the current shutdown,” he said. “We have heard concerns from some MBA members that the inability to secure the required flood insurance may jeopardize loan closings. FEMA should reverse its decision. The longer this shutdown goes on, the more disruptive this decision will be.”

In new guidance Dec. 28 (https://www.fema.gov/news-release/2018/12/28/fema-resumes-selling-flood-insurance-policies-during-appropriations-lapse), FEMA said it would resume sale of new insurance policies and renewal of expiring policies, rescinding the earlier guidance.

“As of this evening, all NFIP insurers have been directed to resume normal operations immediately and advised that the program will be considered operational since December 21, 2018 without interruption,” FEMA said.

FHA Single-Family Loan Endorsements Remain in Place; Ginnie Mae Remains Functional
Despite the shutdown affecting HUD operations, the department said FHA single-family loan endorsements could remain in place, albeit at a slower pace because of reduced staff. Based on past shutdowns, Home Equity Conversion Mortgage and Title I loan endorsements may not be available.

Ginnie Mae should retain much of its functionality, with the exception of payments to investors in Ginnie Mae securities, as is pooling of loans already submitted. However, institutions with expiring commitment authority would not be able to be reapproved during the shutdown.

VA Unaffected
The Veterans Administration should be largely unaffected by the shutdown, as its budget appropriations have already been approved.

Some IRS Operations Could Be Affected
MBA said prior shutdown experience suggests the Internal Revenue Service would halt processing of paper-submitted requests. As with FHA, IRS online networks may be available, but this outcome is not certain.

New Home Sales Report a No-Show
Because of the shutdown, the Commerce Department postponed its Dec. 28 report on November new home sales. Through October, new home sales have fallen by 12 percent from a year ago.

S&P CoreLogic Case-Shiller Home Price Index Up 5.5%
The S&P CoreLogic Case-Shiller National Home Price Index reported home prices in the U.S. grew by 5.5 percent in October, the seventh consecutive month of slowing home-price growth, which is now at its lowest level since January 2017.

Average home prices for the top 10 metropolitan areas increased by 4.7 percent, down from the previous month’s 4.9 percent increase. The top 20 metropolitan areas also posted a gain of 5 percent year over year, down from 5.2 percent in September. Furthermore, ten of the 20 metropolitan areas reported slower price increases month over month this October.

Pending Home Sales Down 0.7%
The National Association of Realtors reported pending home sales fell by 0.7 percent in November and fell by 7.7 percent from a year ago, the 11th straight month of annual decreases. Pending home sales rose in the West and Northeast and fell in the Midwest and South and fell annually in all regions.

Consumer Confidence Drops Again
The Conference Board, New York, reported its Consumer Confidence Index decreased in December, following a modest decline in November. The Index now stands at 128.1, down from 136.4 in November. The Present Situation Index declined slightly, from 172.7 to 171.6. The Expectations Index decreased from 112.3 last month to 99.1 in December.

First American: California Wildfires Raise Loan Defect Index
First American Financial Corp., Santa Ana, Calif., said its Loan Application Defect Index for November increased by 2.5 percent from October, in part because of risks from 2018’s California wildfires. From a year ago, the Index fell by 2.4 percent and is down by 20.5 percent from its high point of risk in October 2013.

The Defect Index for refinance transactions increased by 2.8 percent compared with October and is up 5.8 percent compared with a year ago. The Defect Index for purchase transactions increased by 2.4 percent compared from October and is down 7.7 percent compared with a year ago.