While government-guaranteed mortgages like from the Federal Housing Administration (FHA) and Veterans Administration (VA) and loans not requiring a government guarantee are continuing as if the shutdown never occurred, U.S. Department of Agriculture (USDA) mortgages are on hold for the time being.
Unlike FHA- or VA-backed mortgages, USDA-backed loans require an extra review after preliminary approval. Most of the staff is furloughed until the shutdown ends, meaning no one is available to conduct those reviews.
In the 2024 fiscal year, the USDA backed $6.1 billion of mortgage debt across 33,000 loans and lent another $1 billion directly under a program for low- and very-low-income buyers.
Rural Homebuyers to Feel the Brunt
USDA loans have geographic restrictions that limit their use to rural and some suburban areas, as well as income caps that aren’t parts of other government programs. The USDA loans also have popular features like es like a no-money-down option, low fees, and low credit score requirements make them popular with first-time homebuyers. Some of those homebuyers now on hold may have the option of looking into FHA or VA loans.
Beyond loans awaiting the review, future loans are also in doubt under terms of the USDA Lapse of Funding Plan, which states: “The Anti-Deficiency Act (ADA) prohibits agencies from incurring obligations in advance of, or that exceed, an appropriation. Thus, with certain limited exceptions, an agency cannot incur obligations when the funding source for the obligation is an appropriation that has lapsed. Any activities that would incur a new obligation must be suspended and are prohibited. Activities that are underway that would lead to increased obligations or incurred costs must cease.”
As of Oct. 1, there is no addition funding and won’t receive any more until new spending is approved.
“In the event of a lapse in appropriations, the Department will immediately suspend regular agency operations,” the lapse of funding plan adds. “Certain functions and activities, however, may be continued even in the absence of an annual appropriations Act or continuing resolution.”
However, final mortgage approval is not among those functions or activities; the ones that may continue, even though the government is shut down, include ones that are:
- Financed by a resource other than current year annual appropriations;
- Expressly authorized by law to continue in the absence of appropriations;
- Authorized by necessary implication to continue in the absence of appropriations;
- Necessary to discharge the President’s constitutional duties and powers; and
- Related to emergencies where there is a reasonable likelihood that the safety of human life or the protection of property would be compromised, in some significant degree, by delay in performance.
Upon the enactment of appropriations and the resumption of regular operations, USDA staff offices and agencies “may resume program activities consistent with all applicable Departmental operating procedures,” according to the Lapse of Funding plan. “Furloughed employees will be expected to return to duty.”
