How the Government Shutdown Could Affect Real Estate Loans

With the federal shutdown now underway and anxiety rippling through housing, there are clear, practical ways to stay informed and keep transactions moving.

We are into Week Two of our federal government shutdown, and everyone involved in the nation’s housing market is watching and waiting for a quick resolution to keep home loans and settlements moving through the pipeline.

A federal shutdown doesn’t halt every mortgage program equally. Conventional financing typically continues, while some government-backed loans and flood insurance can see slowdowns or brief pauses. Here’s a clear rundown of what’s likely to keep moving, where to expect delays, and practical steps to keep transactions on track.

Let’s take a look at how most lending programs may be affected.

Conventional (non-government) Loans

Conventional loans are generally the steadiest path during a shutdown because Fannie Mae and Freddie Mac don’t rely on annual appropriations. The mechanics of underwriting still work; the friction shows up when a human step or government system is needed. Here’s what to watch:

• Status: Fannie Mae and Freddie Mac operations are not funded through annual appropriations, and generally should continue without disruption.
• Potential bottlenecks: Employment and income verification for federal workers, certain third-party data pulls, or manual checks may take longer—especially if a shutdown stretches past ~30 days.
• Workarounds: Lenders often use alternative documentation (recent pay stubs, bank statements, written VOE alternatives) to keep files moving.

FHA & Ginnie Mae (HUD) loans

FHA lending often continues in a limited-staff environment, with automated systems doing most of the heavy lifting. The trade-off is slower responses when an exception or a manual review is required. Expect the following dynamics:

• Status: Historically, FHA has continued endorsing most single-family loans during shutdowns, though staffing is limited and some programs (e.g., HECM, Title I) can be restricted.
• Impacts you may feel: Slower response times from HUD offices and help desks; case-by-case delays when a manual touch is needed. Automated underwriting systems often stay online, allowing many loans to progress.

VA home loans

VA guarantees typically remain available, which keeps the core engine running. The pinch point is support capacity—regional offices and help lines may be short-staffed, so order anything that needs VA’s direct involvement early. Key specifics:

• Status: VA guarantees typically remain available, but call centers and regional support may be curtailed if significant staff are furloughed, and some estimates predict up to 70% of Veteran Benefits Administration staff may be sidelined.
• Impacts you may feel: Possible delays in Certificates of Eligibility (COEs), appraisal reviews/Notices of Value (NOVs), and manual verification items. Early ordering and complete files help minimize friction.

USDA (Rural Development) loans

USDA is the most sensitive to a shutdown because new commitments usually require active agency action, and it has been predicted more than half its workforce will be furloughed. Files with pre-issued commitments may still move; brand-new approvals often have to wait. Practical implications include:

• Status: New conditional commitments or guarantees are often paused during a shutdown.
• Impacts you may feel: If a USDA loan already has a valid commitment issued before a shutdown, it may still close under certain circumstances; otherwise, new approvals may wait until funding resumes.

National Flood Insurance Program (NFIP)

A lapse in NFIP is one of the fastest ways a closing can stall in flood zones. Existing policies remain in force, but new or renewal policies can’t be issued until Congress reauthorizes the program. That means:

• Status: If NFIP lapses, no new policies or renewals can be issued until reauthorized. Existing, in-force policies remain valid until their normal expiration. Claims may continue while available funds last.
• Why it matters: Federally backed mortgages in designated flood zones require active coverage to close. Transactions needing a brand-new or renewed policy could be delayed until NFIP is back online.

How to keep deals moving

A little choreography goes a long way, and here are some best practices to be aware of and discuss with your Realtor®:

• If you have a VA, FHA, or USDA loan or a property in a flood zone, have an open and honest conversation with your agent so you can anticipate timelines and sequence how to close strategically.
• Front-load documentation. Gather tax returns, recent pay stubs, identity/SSN checks, and (where applicable) flood insurance applications or proof of existing coverage early.
• Pad your timing. Add buffers to contract deadlines and rate-lock periods to absorb potential delays.
• Consider alternatives. Where appropriate, evaluate a shift to conventional financing or programs less exposed to shutdown effects.
• Stay proactive with your agent and communicate with all the parties of the transaction – your lender, the other party in the contract, settlement partners, etc. – and get/provide regular updates as agency guidance evolves.
• Monitor policy updates. Keep an eye on NFIP reauthorization and any operational notices from HUD/FHA, VA, and USDA.

Bottom line

A shutdown can introduce friction, but with early verification, careful sequencing, and clear communication, many transactions can still reach the finish line. If you’re unsure which path is most resilient for you, let’s talk through options before you write an offer with your agent or accept terms on a current listing.

Questions about a specific file or scenario? I’m here to help you game-plan.

Bill Stern | The Stern Team
Branch Manager | NMLS ID # 267577
CMG Home Loans | NMLS ID# 1820
M: 540-222-0164
bstern@cmghomeloans.com
Notice: This is an advertisement and is not a commitment to lend. Contact a loan officer today to explore the financing options specific to each borrower.

Visit corcoranmce.com to search listings for sale in Washington, D.C., Maryland, Virginia, and West Virginia.

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