Shutdown could delay government‑backed mortgages, flood insurance
As Congress nears an impending funding lapse at the end of September 2025, federal agency shutdowns could slow issuance and closings for government‑backed home loans and complicate required flood insurance. The FHA and VA will mostly continue core loan guarantees but furloughs may slow processing, the USDA will suspend new direct and guaranteed rural home loans and postpone scheduled direct‑loan closings, and FEMA's National Flood Insurance Program — which underwrites more than 4 million policies — could hamper closings in high‑risk flood areas.
Economy
Government/Regulatory
🔍 Key Facts
- USDA: National Association of Realtors says the USDA will halt issuance of new direct and guaranteed home loans and postpone pre‑scheduled direct‑loan closings during a shutdown.
- FEMA/NFIP: The FEMA‑administered National Flood Insurance Program underwrites over 4 million policies, and interruptions could delay closings for homes in high‑risk flood zones.
- FHA/VA and GSEs: FHA will continue approving most single‑family loans and VA will continue guarantees but agency furloughs could slow processing; Fannie Mae and Freddie Mac may face bottlenecks if IRS tax‑transcript services are curtailed.
📍 Contextual Background
- Civilian personnel whose work the Department of Defense designates as 'excepted' continue to work during a government shutdown, while other Department of Defense civilian employees are furloughed.
- The Government Employee Fair Treatment Act of 2019 provides that government employees automatically receive back pay after a government shutdown.
- Congress enacted the Pay Our Military Act in 2013 to ensure military pay and allowances continued during a government shutdown.
- The Social Security Administration's contingency plans provide that in the event of a lapse in appropriations the agency will follow those plans and beneficiaries would continue receiving Social Security, Social Security Disability Insurance (SSDI), and Supplemental Security Income (SSI) payments.
- A Social Security Administration contingency plan published on Sept. 24 indicated that about 45,000 SSA employees (roughly 90% of the agency's workforce) would remain on the job during a government shutdown, while roughly 6,200 employees would be furloughed.
- Social Security benefits are funded through mandatory spending, meaning the program's funding is provided without an annual expiration and does not require yearly appropriations to continue benefit payments.
- The Department of Defense estimated that about 406,000 of its 741,000 civilian employees would be required to work during a government shutdown because their missions are critical and not easily carried out by service members.