Government shutdown’s impact on real estate

WASHINGTON – April 7, 2011 – The federal government may or may not shut down after Friday. Lawmakers have drawn a line in the sand and, as of today, it appears they won’t reach agreement by the current deadline of budgeting. However, that could change. Or lawmakers could agree to extend the budget by only another week or two to give themselves more time to negotiate. Or lawmakers could surprisingly pull out a budget agreement at the last minute.


If the government does shut down, it won’t impact all federal programs equally. A specific impact depends on whether the agency is privately funded, semi-separate from the government, and other factors. Even insiders aren’t sure what will happen if the government shuts down.

However, the National Association of Realtors issued a list of likely scenarios on how Realtors may be impacted if the federal budget fails to pass:

Federal Housing Administration (FHA)

FHA cannot offer endorsements for any new loans in the Single Family Program and cannot make commitments in the Multi-family Program in the event of a shutdown. FHA will maintain operational activities including paying claims and collecting premiums. Management and marketing contractors managing the REO portfolio can continue to operate.

VA Loan Guaranty Program

Lenders may continue to process and guarantee mortgages through the Loan Guaranty program.

Flood Insurance

The Federal Emergency Management Agency (FEMA) confirmed that the National Flood Insurance Program (NFIP) would not be impacted by a government shutdown.

Rural Housing Programs

The U.S. Department of Agriculture’s field staff is not considered essential personnel, and only essential personnel continue to work during a government shutdown. As a result, the people who typically issue conditional mortgage commitments, loan note guarantees, and modification approvals will not be able to do so, and lenders will not receive approvals during the shutdown.

However, a lender that already received a conditional commitment from the Rural Development office may proceed to close those loans during the shutdown. A conditional commitment, good for 90 days, is given to a lender once a USDA underwriter approves the loan. If a commitment was issued, funds were set aside at that time, and the lender may still close the loan at its leisure.

Fannie Mae and Freddie Mac

The Government Sponsored Enterprises will continue operating normally, as will their regulator, the Federal Housing Finance Agency. Fannie Mae and Freddie Mac back over half of all mortgages originated in the U.S.

Treasury

No official word as of yet, but the Making Home Affordable program, including HAMP and HAFA, may not be affected since the program is funded through the Emergency Economic Stabilization Act, which is mandatory spending and not discretionary.

Internal Revenue Service (IRS)

Should the federal government shut down, the IRS cannot process federal income tax returns or issue refunds. If a buyer expects a refund and hopes to use it toward a downpayment, the closing may have to wait.

© 2011 Florida Realtors®

Reprinted with permission. Florida Realtors®. All rights reserved.

BREAKING NEWS

TALLAHASSEE, Fla. - May 8, 2009 - Having approved a $66.5 billion state budget, the 2009 Florida Legislature adjourned.

For the Florida real estate industry, the budget includes several gems. Perhaps the shiniest: $30.1 million for downpayment assistance programs. Beginning July 1, those who qualify for the federal first-time homebuyers tax credit will be able to apply for downpayment assistance in advance of closing, and then repay the amount borrowed when they get their tax refund.

"What an incredible opportunity for thousands of families," says Cynthia Shelton, 2009 FAR president. "The beauty of this program is that the state will be paid back and, conceivably, more potential homebuyers could take advantage prior to the Dec. 1 expiration of the $8,000 federal first time homebuyer tax credit."

The program will operate through local county housing administrators, though details are still being worked out. Keep reading FAR's EarlyBird e-news and checking the home page of floridarealtors.org for updates.

The state spending plan passed today also includes the following for real estate-related programs:

• Up to $400,000 to prevent, combat and publicize the dangers of unlicensed real estate activity in Florida.

• $540,000 to continue and complete a study to make recommendations on passive strategies on nitrogen reduction that complement the use of onsite wastewater treatment systems.

• $3 million in the Real Estate Trust Fund for the Education and Research Foundation.

• A reduction in the eviction filing fees from $265 to $180 - the only fee reduction in the 2009-10 budget and one with a negative fiscal impact of up to $36 million.

Even though the session was extended to today for the purpose of budget negotiations, all non-budget legislation was finalized last Friday. Here are the highlights reported previously:

• SJR 532, a constitutional amendment that will ask voters to limit increases in property tax assessments on all non-homestead properties to 5 percent annually. First-time homebuyers could benefit, too, with an additional homestead exemption up to $100,000.

• HB 521, a bill that puts the burden of proving that a property tax assessment is correct on the appraiser, not the property owner.

• In the area of property insurance, the Legislature capped rate increases at 10 percent per year for Citizens policyholders (HB 1495). The Legislature also repealed the requirement that, effective Jan. 1, 2010, sellers of property located in a wind-borne debris region, and which has an insured value on the structure of $500,000 or more, provide prospective buyers the structure's windstorm mitigation rating.

• The growth management bill (SB 360) FAR supported passed as a big package. It includes a provision to encourage urban infill by eliminating transportation concurrency, one that allows for expedited comprehensive plan reviews, and another that eliminates the development of regional impact process (DRIs) in urban areas. The bill also extends previously obtained permits and approvals by two years, creates a transition process for moving towards a mobility fee system, and streamlines and reduces inefficiency in the state's approach to growth management