As Shutdown Pressures Intensify, FHA Calls on Lenders to Assist Federal Workers

Three weeks into the partial government shutdown, pressures are mounting.

Even as the Trump Administration and congressional Democrats dig in their heels over funding for a border wall, the partial shutdown–which has been in effect since Dec. 22–is taking its toll on nearly 800,000 federal employees directly affected, to the point where FHA is asking lenders to help out.

FHA this week called on all approved mortgagees and lenders to “be sensitive to the financial hardships experienced by borrowers as a result of the shutdown, including those borrowers subject to furlough, layoff or a reduction in income related to the shutdown.”

In a letter to lenders (, FHA Commissioner Brian Montgomery also urged all approved mortgagees and lenders to waive late fees for affected borrowers and to suspend credit reporting on borrowers nationwide who have been affected by the shutdown.

“FHA-approved mortgagees and lenders are reminded of their ongoing obligation to offer special forbearance to borrowers experiencing loss of income,” Montgomery wrote. “FHA expects all approved mortgagees and lenders to make every effort to communicate with and assist affected borrowers to the greatest extent possible.”

Mortgage Bankers Association Senior Vice President of Residential Policy and Member Engagement Pete Mills said the shutdown poses issues for mortgage lenders and servicers as well, of which MBA has been working with Administration officials and Congress to mitigage.

“MBA was successful in urging FEMA and the IRS to reverse course and reopen the National Flood Insurance Program and IRS tax transcript services, respectively,” Mills said. “That has helped lenders close most of the loans in their pipelines. But there are pockets of challenges, as both the Rural Housing Service and FHA reverse mortgage programs are completely shut down, In addition, if lenders needing help from FHA on individual transactions–for example getting clarity on an eligibility or guideline question–may experience extended delays due to limited staffing that could impact borrower closings.”

Servicers, Mills noted, have more flexibility. “Fortunately, servicers have been given a number of tools to work with to help borrowers experiencing financial challenges as a result of the shutdown,” he said. “The same forbearance options lenders have used successfully assist borrowers during natural disasters such as recent hurricanes and wildfires can be used to help borrowers caught short by the shutdown.”

 Zillow Inc., Seattle, this week released an analysis showing federal employees who are not being paid during the shutdown and own their homes pay nearly $249 million in monthly mortgage payments. Its subsidiary HotPads released an analysis finding renters within that group pay nearly $189 million for housing each month.

Zillow Senior Economist Aaron Terrazas noted FHA is operating with limited staff and warns that endorsement of loans may be delayed. “That could mean some loans don’t close, as that decision depends on the flexibility of individual lenders, leaving buyers unable to complete their purchase,” he said. “Many lower-income and/or first-time buyers opt for the FHA-insured loans because they often allow for smaller down payments and offer more forgiving credit-score requirements than conventional loans.”

Zillow estimated 3,900 mortgage originations are processed each business day for loans backed directly by federal government agencies such as FHA and the Rural Housing Service, resulting in nearly 50,000 mortgages could be affected.