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- As the government shutdown stretches past 30 days, it’s causing lapses in National Flood Insurance Program (NFIP) policies and complicating real estate closings in flood-prone areas, according to the National Association of Realtors (NAR).
- From Nov. 3, Fannie Mae and Freddie Mac will require government workers buying homes to show at least two months of documented reserves due to ongoing shutdown effects.
- NFIP policies expiring during the shutdown face a 30-day renewal grace period; meanwhile, private flood insurance and policy assignment are options to maintain coverage.
- USDA loans are unavailable, FHA and VA loan processes face document delays, and military relocations might be delayed, impacting homebuyers during the shutdown, per NAR.
An AI tool created this summary, which was based on the text of the article and checked by an editor.
Fannie and Freddie will want government employees to show they have reserves, and some homeowners are now outside the 30-day grace period for National Flood Insurance Program renewals.
Some homeowners in the National Flood Insurance Program are starting to see their policies lapse as the Oct. 1 government shutdown enters uncharted territory, the National Association of Realtors warns.
If the shutdown is still ongoing on Nov. 3, Fannie Mae and Freddie Mac will start requiring homebuyers who work for the government to show they have at least two months of documented reserves when applying for a loan.
Shannon McGahn
“We’ve never seen a full government shutdown go past 30 days, so it is difficult to know the long-term effects,” NAR Chief Advocacy Officer Shannon McGahn said in a statement Friday. “But we do know there’s a ripple effect that gets worse by the day. The effects on federal housing programs are being felt throughout the country. Our members are reporting it in real time.”
The National Flood Insurance Program (NFIP) expired on Sept. 30, complicating closings in flood zones. Fannie Mae and Freddie Mac expect lenders to continue to perform flood zone determinations, and homes located in Special Flood Hazard Areas must have flood insurance coverage or evidence of pending issuance.
Sellers can assign existing NFIP policies to homebuyers, and borrowers can also opt for private flood insurance.
While existing NFIP policies remain active and transferable, some homeowners whose policies are expiring are now bumping up against a 30-day grace period for renewal.
“As the shutdown drags on, many homeowners and businesses that rely on the NFIP could see their coverage expire, leaving families and properties in the highest-risk areas exposed in the middle of hurricane season,” NAR warned.
Although USDA loans are currently unavailable, NAR says the shutdown has not affected most FHA and VA loan closings. But many borrowers are experiencing delays in obtaining documents like federal payoff statements and IRS income verifications, and FHA condo buyers are out of luck if the building they want to purchase in is not preapproved.
For now, active-duty military service members are getting paid, but the shutdown “may delay the processing of military relocations that are already underway, affecting service members’ ability to complete their home purchases at their new duty stations,” NAR noted.
As part of its efforts to pressure lawmakers to end the shutdown NAR has issued a “call for information” asking Realtors to write their representatives with specifics of how the shutdown is affecting them.
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