The current government shutdown may lead to disruptions and potential delays for borrowers with HUD-insured loans.
During this period, Fannie Mae and Freddie Mac remain in full operation and continue to support lenders and borrowers.
As of October 1st, here is what we understand based on HUD’s operations as it relates to FHA|HUD loans in application or being serviced and related guidance:
As it relates to Multifamily:
- Closings and endorsements will continue for projects with Firm Commitments or Firm Approval Letters issued before the shutdown. Amendments (including mortgage increases) may also be reviewed and approved, subject to HUD handbook processing guidelines, as long as commitment authority is available.
- During the lapse:
- Construction draws: MAP and Risk Share lenders servicing construction loans may, at their own and the owner’s/general contractor’s risk, process interim construction or repair draws (including Section 223(f) repairs). Limited inspections may proceed if under a funded contract and performed independently, or with oversight from an excepted HUD employee. The GTM for each region will approve inspection deliverables to facilitate contractor invoices. All other inspections will be performed on a post-review basis once HUD reopens.
- Escrow releases: Lenders may, at their and the borrower’s risk, release funds from Operating Deficit and Working Capital accounts to support project operations. HUD will review these releases after reopening.
- Change orders: No change orders will be processed or approved during the shutdown.
As it relates to Healthcare Programs (Section 232)
- Closings and endorsements will continue for projects with Firm Commitments issued before the shutdown. Amendments (including mortgage increases) may also be reviewed and approved, subject to HUD handbook processing guidelines, as long as commitment authority is available.
- HUD will continue to:
- Approve emergency repairs.
- Respond to issues posing an imminent threat to resident safety or the protection of property.
- Carry out activities necessary to support the orderly termination of insurance, including processing extension and termination requests, loss mitigation, asset management (including high-risk interventions and mortgage-in-possession actions), processing insurance claims, and liquidating or disposing of assets resulting from insurance claims.
- During the lapse:
- Escrow releases: Lenders may, at their and the borrower’s risk, release funds from Operating Deficit, Working Capital, and Debt Service Reserve accounts to support operations. HUD will review these after reopening.
- Construction draws: Lenders servicing loans with construction or repair components may, at their and the owner’s/general contractor’s risk, process interim draws. Limited inspections may continue under funded contracts if the contractor has sufficient capacity or, if necessary, under the oversight of an excepted HUD employee. All other inspections will be handled on a post-review basis once HUD reopens.
- Change orders: No change orders will be processed or approved during the shutdown.
The information provided in this article, including, without limitation, any opinions, predictions, forecasts, commentaries or suggestions, is for informational purposes only and should not be construed to be professional or personal investment, financial, legal, tax or other advice.