Government Shutdown 2025 | Empire Learning

**Sources (with links) used for this article are compiled at the bottom. These sources would also be good for further reading/research into the topic.

The phrase “government shutdown” might sound like something that only affects Washington, D.C., but its impacts can hit close to home... literally. When the federal government shuts down, even temporarily, it can create real hurdles for people buying or selling homes and for the professionals helping them. MLOs and real estate agents are on the front lines, guiding clients through an already complex process now sprinkled with a bit of chaos.

The current government shutdown has been no exception. It’s brought a mix of delays, uncertainty, and creative workarounds to keep the dream of homeownership moving forward. In this article, we’ll break down exactly what’s happening, how it affects mortgages and the housing market, and what you can do about it.

Why a Shutdown Matters to Homebuyers and Sellers

Homebuyers and sellers might be surprised that a political impasse hundreds of miles away could slow down their closing or loan approval. But consider this... many parts of a typical real estate transaction rely on federal agencies or programs. During a shutdown, some of these agencies operate with a skeleton crew, and some services pause entirely. Here are a few immediate ripple effects...

Mortgage Application Delays

Home buyers could face stalled loan approvals. For professionals in the middle of a mortgage application, you might find the process moving at half-speed. This is especially true for loans that need a little help from Uncle Sam (FHA, VA, or USDA loans). While these loans aren’t completely off the table during a shutdown, the staffing and support at those agencies are trimmed down.

The FHA (Federal Housing Administration) is still endorsing new loans, but certain programs like reverse mortgages (HECM) or Title I home improvement loans are on hold. Any step that normally requires a human underwriter or government staff approval could take longer.
VA (Department of Veterans Affairs) loans are similarly chugging along using leftover funding from last year, but reduced staff means things like obtaining a Certificate of Eligibility or scheduling appraisals might be slower.
USDA (Department of Agriculture) rural home loans are hit the hardest. In most cases, new USDA loan guarantees won’t be issued at all during the shutdown. Lenders and borrowers with a USDA loan in progress find themselves in limbo unless a conditional commitment was already in hand before the shutdown.

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“Business as Usual” for Conventional Loans (Mostly)

If your client is using a conventional mortgage (those backed by Fannie Mae or Freddie Mac), the good news is that those are largely unaffected by the federal funding fight.

Fannie Mae and Freddie Mac are not funded by the government’s annual budget, so they’re open for business.

However, “unaffected” doesn’t mean completely immune. These loans sometimes need verifications from federal agencies. For example, lenders often verify a borrower’s income with the IRS or confirm someone’s Social Security number. During past shutdowns, IRS income verification (tax transcripts via the 4506-T form) could be a big holdup.

This time around, thanks to some forward-thinking changes, the IRS’s income verification service is considered an essential service and is expected to keep running. That’s a relief, but it doesn’t guarantee perfection... the IRS still might have fewer hands on deck, and processing could be slower if the shutdown drags on.

The Social Security Administration, on the other hand, typically won’t be verifying Social Security numbers during a shutdown. Lenders might have to postpone that verification or find alternatives if possible.

The bottom line for conventional loans is that they’re in better shape than government loans, but minor delays in paperwork could pop up. MLOs handling these loans should be ready to improvise on verification timing, and real estate agents should keep that in mind if a buyer’s paperwork isn’t final.

Flood Insurance Roadblock

Here’s a curveball many don’t see coming... flood insurance. If a home is in a flood zone, lenders require an active flood insurance policy before the deal can close. The National Flood Insurance Program (NFIP) is a federal program, and it’s directly tied to government funding. Unfortunately, the NFIP’s authority to issue new policies lapses during a shutdown.

That means as of the shutdown start, you can’t get a new NFIP policy or renew an expiring one. Home sales in areas designated as Special Flood Hazard Areas could be stopped in their tracks because the buyer can’t secure the required insurance. Existing flood policies remain valid (so current homeowners are still covered for now), but anyone in the process of buying a home in a floodplain is in a bind.

To put it in perspective, during a past lapse in 2010, it’s estimated that over 1,400 home sales per day were delayed or canceled due to unavailable flood insurance. Real estate agents should be aware of this if they have listings or buyers in flood zone areas... You might need to explore private flood insurance as an alternative.

Many private insurers offer flood policies, and lenders can accept those in place of NFIP coverage. It might cost a bit more or require some extra legwork, but it’s a possible workaround to keep the closing on schedule. The key is to act quickly. If you find out the NFIP is on hold, get a quote from a private insurer and discuss it with the lender. It can save everyone a lot of grief.

Federal Employee Mortgages in Limbo

A unique group affected by the shutdown is the federal employees themselves (and contractors) who aren’t getting paid. If you’re a loan officer or agent working with a buyer who works for the government, pay attention.

Lenders verify employment and income as part of final loan approval. If an applicant is suddenly furloughed, that raises questions:

Are they technically employed?
Will they have trouble making payments?

The good news is that lenders and the big mortgage agencies have dealt with this before and have guidelines. Fannie Mae and Freddie Mac have said loans to furloughed federal workers are still eligible... being furloughed is usually viewed as a temporary situation, not a job loss.

Loan officers might just need to get a bit more documentation, like a letter from the employer or proof of past income, and possibly do a final verification once the shutdown is over. That said, a prolonged lack of pay could affect a borrower’s debt-to-income ratios or make them nervous about taking on new debt.

For agents, if your buyer is a government employee, it’s wise to communicate with the lender early and see if any extra steps are needed. The buyer might need to provide recent pay stubs, or even a bank statement showing a cushion of savings (to reassure everyone that they can weather a missed paycheck or two).

It’s a situation that calls for empathy and flexibility. Nobody asked to be furloughed, and both lenders and real estate agents are finding ways to keep these folks’ home purchases on track. Patience and communication are key.

Wider Impacts on the Housing Market

Beyond the immediate transactional hiccups, a longer government shutdown can cast a bit of a shadow over the broader housing market. Here’s how...

Buyer Confidence and Demand

Buying a home is a big decision, and it’s often as much emotional as it is financial. Big news headlines about government dysfunction and hundreds of thousands of workers going without pay can shake consumer confidence. People start second-guessing... “Should we really buy a house right now if the economy might take a hit?”

In past shutdowns, if the impasse is brief, the impact on overall housing demand has been fairly minor. But if it stretches on for weeks, especially a month or more, the worry can grow. Potential buyers, even those not directly impacted, may adopt a wait-and-see attitude, which means fewer showings and a slower market.

Real estate agents might need to reassure clients (with good reason) that houses are still being bought and sold, and life is going on. It’s important to separate the political drama from local market realities. We likely aren’t looking at 2008 all over again. This is more about short-term uncertainty.

For sellers, understanding why a normally eager buyer might pump the brakes can help in keeping negotiations together – sometimes a small incentive or just a little extra time can make nervous buyers feel comfortable again.

Interest Rate Questions

One question on every MLO’s mind is, what’s happening with mortgage rates? Interestingly, a government shutdown can tug rates in different directions.

On one hand, bad news and economic worries often make investors move money into safer assets like U.S. Treasury bonds. That usually causes yields (and indirectly mortgage rates) to dip a bit. We actually saw some of this early in the shutdown as markets reacted to the uncertainty.
On the other hand, if important economic data reports (like jobs numbers or inflation figures) are delayed because government statisticians are furloughed, lenders and investors are flying a little blind. Less data can mean more guesswork about the economy’s health, and that can add a risk premium to rates.

In other words, uncertainty can nudge rates up. So far, the movements in mortgage rates during this shutdown have been subtle (nothing extreme), but day-to-day volatility could increase the longer this goes on.

For loan officers, it means keeping a close eye on the market and perhaps advising clients to lock in a rate if they’re comfortable, rather than gambling on where things might go next.
Agents, on the other hand, might use the opportunity to remind fence-sitters that today’s rates, even with minor fluctuations, are still historically favorable, especially if rates happened to dip a little amid the news. It’s a classic case of short-term news versus long-term financial planning.

Economic Effects

The housing sector doesn’t exist in a vacuum... It’s tied to the broader economy. Housing makes up almost 20% of the U.S. economy when you count construction, real estate services, and related spending. A shutdown means many federal employees and contractors aren’t getting paid, which in turn means a chunk of consumers have less money in their pockets for a while.

If the shutdown continues, local businesses in areas with lots of federal workers (think D.C., military towns, etc.) will feel the pinch. While this might not directly stop someone from buying a house, it can contribute to a general economic slowdown if it drags on. The irony is that a slower economy could eventually push mortgage rates down a bit, but nobody truly wants that scenario because of the pain involved to get there.

We’ve also got to remember that the government is a huge player in housing through programs and data. During the shutdown, reports on housing starts, home sales, and construction from agencies like the Census Bureau might not be released on time. Builders, policymakers, and economists rely on that info.

A lack of data can make it harder to know what’s really happening in the market right now, which can lead to caution all around. For now, consider the housing market to be in a “holding pattern” on a national level – still moving, but with a close eye on Washington for any signs of turbulence ahead.

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Keeping Transactions on Track

All these challenges might sound daunting, but both mortgage professionals and real estate agents have the tools and experience to manage through a shutdown. Here are some tips and best practices to help everyone get to the closing table as smoothly as possible.

Communicate Early and Often

This might be the golden rule always, but it’s especially true now.

If you’re an MLO, check in with your borrowers about where their loans stand. If additional documents or alternative verifications might be needed (for example, an extra pay stub, a bank statement to show reserves, or a letter from an employer), let them know as soon as possible.
If you’re a real estate agent, talk to the lenders involved in your deals. Ask if any issues have popped up due to the shutdown. The sooner you know there’s a potential delay, the more proactively you can work with all parties to solve it. No one likes last-minute surprises, so keep those phone lines and email threads open. A quick update can save a lot of stress.

Set Realistic Expectations (Build in Extra Time)

In the current environment, speed bumps are likely.

As an agent, consider negotiating slightly longer closing periods in the contract, just in case. It’s better to have a deal close a week early than to be scrambling for an extension at the last minute.
For MLOs, when you’re pre-approving clients or setting rate lock periods, pad the timeline if you can. Everyone involved – buyers, sellers, movers, you name it – should be mentally prepared that things might not happen as fast as they would in a fully functioning government scenario. A little expectation management goes a long way to reducing anxiety.

Be Ready with Workarounds

One hallmark of a true professional is creativity in problem-solving. Private sector alternatives can fill some gaps left by government services.

If the IRS’s automated transcript system is slow, perhaps the borrower’s tax returns and W-2s (with a signed affidavit of authenticity) can suffice for now, with the transcript to be verified later.
If the USDA loan is halted, maybe the buyer can temporarily switch to an FHA loan (if they qualify) or the deal can be structured as a short-term bridge until the guarantee comes through.
In the case of flood insurance, as mentioned, have a list of private insurance companies or brokers who can issue a policy within days. Many lenders accept private flood insurance as long as the coverage is equivalent. Check the guidelines and don’t be afraid to educate the other side of the transaction about this option.
Also, lean on technology where possible. Some verifications that used to require a faxed form from a government office might now be available through an online database or a fintech service.

Finally, stay informed on any temporary guidelines changes. During the last big shutdown, Fannie Mae and Freddie Mac both rolled out temporary rules allowing things like post-closing verifications or alternatives for furloughed employees. Those playbooks are likely in effect again, and knowing them can make you the hero who saved the deal.

Advise Clients, Don’t Desert Them

Buyers and sellers will remember how their team handled this storm.

For agents, this is a chance to show your value. If you have a nervous buyer asking if they should delay house-hunting, help them understand the situation. If their financing is solid (say they’re doing a conventional loan, not a government one, and their job is stable), encourage them that it’s okay to proceed, just with a bit of caution. If they’re using an FHA/VA/USDA loan, don’t tell them it’s hopeless – it’s not! Just explain that there could be delays and that you, alongside their lender, will guide them through it.
For loan officers, you may need to hold some hands (figuratively) and explain to borrowers why you’re asking for something twice or why the underwriter needs a bit more time. It’s critical to be clear and upfront yet reassuring. Nobody likes being left in the dark, especially when making one of life’s biggest financial transactions.

Proactively reaching out and advising clients on what they can do (versus focusing on what they can’t control) means you’ll earn their trust and probably some referrals down the line for handling a tough situation with grace.

Stay Informed (and Let Others Know)

News about the shutdown’s status changes by the day. One week, it might seem like a resolution is near. Next, it could devolve into more political posturing. Make it a habit to check for updates from reliable sources.

Industry groups like the Mortgage Bankers Association (MBA), the National Association of Realtors (NAR), or home builder associations are putting out guidance and alerts. When the government reopens, they’ll also detail any catch-up processes (like how quickly FHA will get back to full speed, etc.).

Staying informed also isn’t just for you... It’s something you can pass along to clients. A quick newsletter blurb or social media post (written in plain language) can position you as the go-to expert who understands what’s happening.

It can be as simple as, “Hey folks, quick update: The USDA loan program is paused during the shutdown, so if you were considering a zero-down USDA loan, let’s talk about a Plan B to avoid delays.”

This kind of outreach can reduce panic and also remind potential clients that you’re on top of things.

Silver Linings and Final Thoughts

It’s easy to focus on the negatives during a government shutdown, but it’s worth noting that the industry has been through this before and learned a few tricks along the way. Lenders have contingency plans for these scenarios, and many federal housing programs have built-in measures to keep things running at least at a minimal level when funding lapses.

For instance, FHA and VA loans are still happening, and Fannie and Freddie are stepping in with flexibility where needed. Additionally, banks and credit unions often step up to help affected customers. Some offer short-term loans to furloughed employees or waive fees, understanding this is a temporary situation. Goodwill gestures can indirectly support the housing market by easing financial stress on some borrowers.

For now, the best approach for anyone in real estate or mortgage lending is to stay:

Patient
Proactive
Positive

The wheels of home buying haven’t stopped turning... they’re just grinding a bit until the oil of government funding gets added back. Houses are still being listed, buyers (especially those not reliant on government programs) are still out there shopping, and interest rates remain attractive by historical standards.

In fact, some smart buyers see a strategic opportunity. If a few others pause their search, there might be less competition for homes in the short term. That, combined with any slight dip in rates, could make this an unexpectedly good moment to lock in a deal – as long as you have the right team to navigate the hurdles.

Lastly, remember that every shutdown is temporary. It might feel like it’s dragging on, but eventually, a resolution will come, federal workers will get back to work (and receive back pay), and the clogged-up pipelines for loans and insurance will clear. When that happens, there could even be a mini surge of activity as delayed transactions all rush to close.

TLDR...

In this “shutdown season,” MLOs and real estate agents are proving their worth by keeping deals alive and clients calm. It’s not the first time politics has disrupted the property world, and it likely won’t be the last.

Learning about the effects, sharing knowledge with clients, and finding creative solutions mean you can turn a challenging situation into a story of excellent service.

Home buying and selling are still happening, just with a few extra detours. With teamwork and tenacity, we’ll guide our customers through the maze and come out the other side... keys in hand and smiles on faces.