With just a handful of days between now and the FY26 government funding deadline (midnight on Sept. 30), Congress appears to be moving toward a “shutdown showdown.”
The National Association of REALTORS® is working to protect the real estate economy in the event Congress does not pass a stopgap spending measure or reach a larger spending agreement before Oct. 1. Although the House passed a continuing resolution to fund the government through Nov. 21, that measure failed in the Senate.
A government shutdown impacts housing, mortgage lending and other industries crucial to the real estate sector. It also results in a lapse of authorization for the National Flood Insurance Program (NFIP), which NAR says the administration is committed to protecting.
“NFIP supports nearly half a million home sales annually, contributing $70 billion to the U.S. economy and over a million jobs,” says NAR Executive Vice President and Chief Advocacy Officer Shannon McGahn. “We are taking this critical information straight to lawmakers and working with the administration to ensure that NFIP resources are available and can be deployed during a shutdown. Each day a shutdown continues, the effects on the housing sector grow.”
During a lapse, most lending regulators suspend the flood insurance requirement, allowing sales to proceed without coverage. However, this can create complications if a flood occurs and it's unclear whether the home will be covered retroactively once NFIP is reauthorized.
“NAR has original research and resources to both educate and assist lawmakers and prepare our members for the potential impact of a partial government shutdown. Real estate makes up nearly 20% of the entire U.S. economy, and we encourage the Senate to pass the clean CR that was previously passed in the House to avoid any disruptions in this sector,” McGahn continues.
How a Shutdown Affects the Real Estate Economy
NAR has been monitoring government programs important to the real estate sector to assess the potential impact of a shutdown. Here are eight programs in which NAR members might feel an impact.
National Flood Insurance Program (NFIP)
During a lapse of authority, the NFIP, administered by FEMA, cannot sell new or renewal insurance policies. However, existing NFIP policies will remain in effect until their expiration dates, and claims will continue to be paid until the funds are depleted. Home buyers can also continue to assume the seller’s policy during a lapse, and most insurance regulators suspend the flood insurance requirement for the duration. Private market flood insurance is also an option.
NFIP lapses introduce uncertainty into real estate markets. Buyers may be unable to obtain coverage before closing, and owners may face delays in processing claims if there is an extended lapse. To avoid complications, buyers should secure NFIP coverage well before the expiration date or consider private flood insurance. Even minor flooding can cause significant damage, and NFIP can pay claims only while funding remains available.
NAR is urging Congress to support long-term reauthorization and reform of the National Flood Insurance Program (NFIP). Last month, Senators Cory Booker (D-N.J.) and Bill Cassidy (R-La.) requested public input on 46 questions covering NFIP reauthorization, mapping, mitigation and other reforms. On Sept. 15, NAR submitted a letterpdf to the senators and the Senate Banking Committee, thanking them for the opportunity and outlining several key recommendations.
Government-Sponsored Enterprises
During previous shutdowns, Fannie Mae and Freddie Mac have continued normal operations since they are not reliant on appropriated funds. However, there are four key areas of consideration:
- Verification of Employment: For home buyers employed by the federal government, both Fannie Mae and Freddie Mac allow for verification of employment to occur after closing but prior to delivery of the loan.
- Tax Transcripts: Freddie Mac requires all borrowers to sign a 4506T (Request for Transcript of Tax Return) request form before a transaction’s closing, but the request does not have to be processed prior to the closing. Fannie Mae requires the same unless the borrower’s income can be verified through Fannie Mae’s proprietary Desktop Underwriter verification system, in which case no 4506T is required. During past government shutdowns, the IRS suspended the issuance of tax return transcripts.
- Verification of Social Security numbers: Sometimes, Social Security numbers are disputed and must be verified. Fannie Mae allowed lenders to verify the numbers prior to delivery during the 2018 shutdown as a precaution, but did not allow delivery if the numbers were not confirmed. Freddie Mac does not require verification of a Social Security number.
- Proof of flood insurance coverage application: Both Freddie Mac and Fannie Mae require a completed flood insurance application and a copy of the check for the first premium, a settlement statement reflecting payment of the initial premium, or an assignment of an existing policy from the previous owner.
Internal Revenue Service
At the time of writing, the IRS had not published its shutdown contingency plan. In past government shutdowns, however, the agency has consistently held that its employees can remain on the job during shutdowns only if their duties protect the government. For example, during the 2018 closure, the roughly 12% of employees who were required to report to work could open mail only in search of checks payable to the government and were not allowed to answer taxpayer phone calls, issue tax refunds, release liens and levies, or perform most other taxpayer services.
Rural Housing Programs
Under a shutdown, the U.S. Department of Agriculture will halt issuance of new direct and guaranteed home loans, and any scheduled direct‑loan closings will be postponed. Pending conditional commitments for guaranteed loans are still being reviewed. However, closings for guaranteed loans that do not yet have a guarantee will proceed only at the lender’s risk. Disbursements on existing construction loans may continue, but only when doing so is necessary to protect USDA’s property interests. All pending loan servicing actions, including guaranteed loss claims, must be documented and secured so that processing can resume promptly once operations are restored. Rental assistance under USDA contracts will continue only if a threat to USDA’s property interests becomes imminent (after 30 days), and only if existing rental assistance funding remains available.
Veterans Affairs
The Department of Veterans Affairs will continue to guarantee home loans during a government shutdown, and lenders may keep processing applications. However, some VA staff and support functions may be reduced, which may slow down approvals, appraisals and certificate of eligibility requests. Veterans seeking a new loan or refinance should check with their lender for updated processing times during an extended shutdown.
Environmental Protection Agency
Under the EPA’s shutdown plan, most employees will be furloughed. This will impact various regulatory programs and compliance activities, including wetlands determinations under the 404 program and enforcement of the lead-based paint disclosure and renovation, repair, and painting programs.
HUD Programs
During a federal government shutdown, the Department of Housing and Urban Development’s contingency plan allows many key housing programs to continue, though often at reduced capacity, while others face significant disruption. The Federal Housing Administration (FHA) will keep endorsing new single-family mortgage loans, with the exception of products like home equity conversion mortgages and Title I loans. Critical FHA operations such as claim payments, mortgage servicing, loss mitigation, and REO property management will continue, often through contractors. However, activities requiring direct staff input, like some condo project approvals, are suspended. If the NFIP halts, borrowers may use private flood insurance alternatives. The FHA Resource Center remains open but with limited staffing, leading to longer wait times and restricted support for case-specific questions.
Housing counseling agencies may operate only if they have already received grant funding and have sufficient cash flow; otherwise, services may be scaled back or paused, as new grants and payments are frozen unless deemed emergency related. For Housing Choice Voucher holders, assistance payments will proceed under current commitments, but new funding approvals and voucher issuances could be delayed. Extended shutdowns may create financial strain for Public Housing Authorities, potentially impacting landlords and tenants. NAR members are encouraged to stay informed and advise clients to maintain close communication with their local PHAs and housing agencies.
Small Business Administration
During a shutdown, the SBA will not process new loans or approve routine small-business loans. However, the agency will continue to close previously approved CDC 504 Loans and carry out limited loan servicing and liquidation activities. The Office of Advocacy will also cease operations. SBA will continue to issue disaster loans should the need arise.
Consensus and What’s Next
Government shutdowns are generally very unpopular among NAR members and the American public. The longest government shutdown lasted 34 days from December 2018 through January 2019. In a previous NAR survey of members on the impact of government shutdowns on their businesses, 75% reported that the shutdowns did not affect their contract signings or closings. However, 11% reported an impact on current clients, and 11% reported an impact on potential clients.
Given the evolving political environment, NAR staff continues to closely monitor federal agencies and work with Congress, the administration, and industry partners to evaluate and address impacts on NAR members and their businesses.
