What a Government Shutdown Means for REALTORS®

As of midnight on December 21, 2018, the President and Congress were unable to agree on the provisions of a Continuing Resolution (CR) to fund the federal government. As a result, a partial shutdown of some government operations has occurred. This partial shutdown includes some federal housing, mortgage, and other programs of interest to the real estate industry. A summary of the impact on selected agencies is provided below.

While this is a very politically dynamic event, National Association of REALTORS® (NAR) staff continue to monitor federal agencies and work with Congress, the Administration, and other groups to assess ongoing impacts to NAR members and their businesses.

Shutdown May Spark Rash of Mortgage Delinquencies

On January 7, 2019, the government shutdown became the third-longest in U.S. history, as 800,000 federal workers and nearly 4 million government contractors braced for a pause in their paychecks. The disruption could impact the ability of many of those affected to pay their mortgages.

Twenty-three percent of Americans have no emergency savings, and 22 percent have less than than three months’ worth built up, according to a 2018 Bankrate.com survey. “Any delay in a mortgage payment could harm an individual’s finances and their credit, which would affect potential purchases in the future,” Jessica Lautz, managing director of survey research at the National Association of REALTORS®, told CNBC.

The U.S. Office of Personnel Management has offered sample letters that federal workers can give to their lenders to explain why they may be late on their payment. The OPM advises government workers to first speak to their lenders or landlords before sending a letter. Workers may be able to work out a reduction in monthly payments during the shutdown. If such a workaround is reached, OPM advises sending a followup confirmation letter to the lender or landlord.

Some banks are making exceptions for those affected by the government shutdown. For example, Flagstar Bank is offering a special program “that provides [government workers] with extra time to coordinate their finances without causing additional fees and/or impacting their credit reporting negatively.” Other banks, such as Citi, Wells Fargo, and Chase, also told CNBC that customers who contact them may be eligible for workaround options on their mortgages, such as short-term forbearance, repayment plays, or loan modifications.

Treasury tax transcript information

Also on January 7, NAR Regulatory & Industry Relations Vice President Joseph Ventrone shared this news from Bob Broeksmit, president & CEO of the Mortgage Bankers Association…
“While the IRS remains closed during the partial government shutdown, on Monday, January 7, 2019, thanks to direct advocacy to the Treasury Department from MBA and close coalition partners, the agency will begin processing requests for tax transcript information made through the Income Verification Express Service (IVES) program. Because it will take time to ramp this service up to normal operating status, it may initially take a few days to process requests that have been backlogged since the funding lapse began on December 22, 2018.”

NAR Helps Secure FEMA Reversal On New Flood Policies During Shutdown

WASHINGTON (December 28, 2018) – In a critical win for home sales while the partial shutdown of the federal government is ongoing, the Federal Emergency Management Agency will issue and renew flood insurance policies, reversing an unexpected and controversial ruling the agency released earlier this week.

“FEMA and the Administration deserve credit for hearing our concerns and acting swiftly to address them,” says NAR President John Smaby. “This new decision means thousands of home sale transactions in communities across the country can go forward without interruption, as Congress intended when it renewed the flood insurance program earlier this week. Our research has shown that 40,000 home sales are lost every month that flood insurance is not available.”

Congress on Dec. 21 passed legislation that extends the National Flood Insurance Program until May 31, 2019. In an unexpected policy decision, though, FEMA on Dec. 26 said it couldn’t allow insurers to issue and renew federal policies while the partial government shutdown was ongoing. That ruling was unexpected because in past government shutdowns, FEMA continued to operate the program as authorized. NAR, along with other organizations, including the Property Casualty Insurers Association of America and the Independent Insurance Agents & Brokers of America, urged policy makers to reevaluate the decision. Congress expressed concern as well.

“We thank the Administration and Congress for stepping up so quickly to ensure the smooth continuation of flood insurance at a time when market disruption would be extremely hard-felt,” says Shannon McGahn, NAR senior vice president of government affairs.

NAR Testifies on Housing Finance Reform

On December 21, 2018, NAR President-Elect Vince Malta testified before the House Financial Services Committee during its hearing, “A Legislative Proposal to Provide for a Sustainable Housing Finance System: The Bipartisan Financing Reform Act of 2018.” Malta, a third-generation REALTOR® and the CEO and broker of Malta & Co., Inc. in San Francisco, CA, commended the Committee for its work toward comprehensive reform of the nation’s housing finance system while outlining NAR’s priorities for a legislative restructuring of Freddie Mac and Fannie Mae.

In his testimony, Mr. Malta outlined NAR’s views of Committee Chairman Jeb Hensnarling’s bill, the Bipartisan Financing Reform Act of 2018. Specifically, Mr. Malta stated NAR’s support for many components within the legislation such as an explicit government guarantee, flexibility given to regulators to set standards in the new mortgage finance system, and the use of a Common Securitization Platform (CSP) as the issuance platform for mortgage-backed securities. These provisions will help build a new housing finance system structure that will be more transparent, while providing a countercyclical mechanism to help ensure mortgage credit is available during periods of economic distress.

While these components are a good foundation for a future housing finance market, Mr. Malta provided suggestions to the Committee that would improve the proposal. Among other things, NAR suggested to include language that would require Ginnie Mae to have a dual mandate to safeguard the secondary mortgage market, but also to ensure for a deep, liquid, affordable, and national mortgage market. Finally, NAR committed to continue to work with Congress and the Administration to create a mortgage market that provides access to affordable mortgage credit for all creditworthy Americans, while ensuring taxpayers are properly protected.

NAR Joins Amicus in AHP Litigation

NAR continues to fight for more affordable health insurance options for members and their families, including through association health plans (AHPs). Today, as one of the founding members of the Coalition to Protect and Promote Association Health Plans, NAR joined and filed an amicus brief in support of the Department of Labor’s (DOL) regulation expanding access to AHPs in the U.S. District Court for the District of Columbia.

In this case, twelve attorney generals (AGs) filed suit against DOL challenging the Association Health Plan (AHP) rule issued in June. The state AG’s include New York, Massachusetts, California, Delaware, Kentucky, Maryland, New Jersey, Oregon, Pennsylvania, Virginia and Washington, plus D.C. The lawsuit challenges DOL’s redefinition of “employer” under the Employee Retirement Income Security Act (ERISA), which the AGs argue is unprecedented and in violation of the Administrative Procedures Act (APA). The AGs further allege harm imposed by the rule related to state insurance market destabilization and increased fraud and abuse by insurers, among other concerns.

The Coalition argues that DOL is entitled to deference because the law is itself ambiguous, which allows DOL to act upon its Congressional authority to interpret ambiguous statutory terms. Furthermore, the interpretation of ERISA was well reasoned and occurred through the proper notice-and-comment procedures under the APA. To counter the AG arguments, the brief also describes the comprehensiveness of AHP coverage, the substantial federal and state oversight over the plans to protect against fraud and abuse, and the fallacies of market destabilization concerns.
Oral arguments in the case are scheduled for late January, which NAR continues to closely monitor and will provide updates. For more information on NAR’s advocacy efforts, please visit the health care reform topic page.

Read the brief  | Read the press release 

EPA Releases Lead Reduction Plan

The President’s Task Force on Environmental Health Risks and Safety Risks to Children (Task Force) has released a Federal Action Plan to Reduce Childhood Lead Exposures and Associated Health Impacts (Action Plan). The Action Plan is a blueprint for reducing lead exposure and associated harms through collaboration among federal agencies and with a range of stakeholders, including states, tribes and local communities, along with businesses, property owners and parents. The Action Plan has four goals with key priorities and objectives that seek to reduce harm to children from exposure to lead. By identifying specific goals and actions, federal agencies can prioritize their efforts and monitor progress. The four goals are:

Goal 1: Reduce children’s exposure to lead sources
Goal 2: Identify lead-exposred children and improve their health outcomes
Goal 3: Communicate more effectively with stakeholders
Goal 4: Support and conduct critical research to inform efforts to reduce lead exposures and related health risks

Updates on the VA Loan Program

On December 17, 2018, the Department of Veteran’s Affairs (VA) released an interim final rule addressing changes to VA guaranteed or insured cash-out home refinance loans as understood to be required by the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act. These changes will address when VA will permit cash-out refinance loans, including the testing parameters to determine if the veteran will gain a net tangible benefit from the refinance, as well as recoupment and seasoning requirements. VA will address changes required by the Act for interest rate reduction refinancing loans (IRRRLs) in a separate rule-making. The rule will be effective on February 15, 2019 and any comments must be received on or before that date.

On December 11, 2018, the Department of Veteran’s Affairs (VA) announced that it will no longer require appraisers to include Fannie Mae Form 1004MC in all VA appraisal reports, however same information that was contained in the Form must continue to be included in the appraisal report. This announcement follow’s Fannie Mae’s decision to allow appraisers to input the information contained in Form 1004MC into the appraisal report in other ways. 

Interim Refinance Rule  | Circular 26-18-29: Market Conditions Addendum to VA Appraisal

Resources for Veterans, dependents, survivors, and federal employees during shutdown (Jan. 14, 2019)

Related stories:
Mortgage Industry Gets Shutdown ReliefThe Washington Post (Jan. 11, 2019)
Federal Government Shutdown Survey – NAR (Jan. 2019)
Government Shutdown Halts Reverse Mortgage Endorsements – HousingWire (Jan. 4, 2019)

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