In what seems to have become an ongoing tradition, lawmakers in Congress are bringing the federal government ever closer to a partial shutdown due to an impending lapse in appropriations scheduled for Friday, March 14 if they can’t agree on a funding plan. The impacts are likely to be felt across a wide swath of government services, but in terms of mortgage lending, the impacts tend to be minimal — except when it comes to reverse mortgages.
With a reverse mortgage, since the vast majority of business is conducted under the Federal Housing Administration (FHA)’s Home Equity Conversion Mortgage (HECM) program, a scaling back of FHA services — including the endorsement of loans for FHA insurance — immediately cease once the current appropriations expire.
Why a shutdown could happen
While the Republican-controlled House of Representatives did pass a continuing resolution (CR) this week designed to keep the government open for six more months, the decision now heads to the Senate where the Democratic minority would need to participate in order to easily pass the plan.
But Democrats are locked out of majorities in both congressional chambers and no longer occupy the White House. Faced with political pressure from constituents to push back against wholesale cuts to the federal government being instituted by the Trump administration and Elon Musk’s U.S. DOGE Service, Senate Minority Leader Chuck Schumer (D-N.Y.) on Wednesday indicated Democrats would be disinclined to support the Republican spending plan.
That would mean that every Senate Republican, alongside at least eight Democrats, would be needed to pass key procedural hurdles to move the spending bill to a final vote. As of Thursday, only one Democratic senator — John Fetterman (Penn.) — has signaled he would support the plan. But one Republican, Rand Paul (Ky.), has also signaled that he would not.
The potential reverse mortgage impact
The action plan for the U.S. Department of Housing and Urban Development (HUD) should a shutdown take place was last updated in Sept. 2023, but a HUD spokesperson explained for HousingWire’s Reverse Mortgage Daily (RMD) that it remains in effect.
In the event of a shutdown under that plan, the “Office of Single Family Housing will endorse new loans, with the exception of [HECM] and Title I loans, under current multiyear loan guarantee commitment authority in order to support the health and stability of the U.S. mortgage market,” the plan says.
The document puts a finer point on it later when specifying “FHA does not have the authority to insure additional HECMs during this period due to the statutory cap limiting the number of HECMs under the HECM program,” a cap that has been a target of unrealized legislative change for years.
Minimum operations necessary to support FHA’s existing portfolio will continue, however, which includes insurance claims payments and servicing of secretary-held notes and mortgages, including HECMs, meaning borrowers with reverse mortgages already in place should not feel the impacts of a shutdown on their ability to take draws.
But government-provided customer service for certain programs, including HECM, is likely to be impacted. The 2023 plan detailed that messages to a HECM-specific support email address (hecmhelp@hud.gov) would not be responded to until appropriations are back in place.
Prior shutdown
The last time there was a partial federal government shutdown, the overall impacts on reverse mortgage business were disruptive but relatively minimal. A lack of FHA endorsement activity artificially inflated the number of endorsed loans the month after funding resumed, and industry performance metrics were clouded for months following the December 2018-January 2019 shutdown.
At the time the shutdown occurred, however, industry professionals regularly reported to RMD that it was largely “business as usual.” Direct lenders tend to be more impacted than brokers, and while some professionals voiced concerns of more adverse impacts if the shutdown remained prolonged, it was short enough in that instance — despite being the longest partial shutdown in U.S. history — to keep things moving relatively smoothly.
Less predictable this time is the nature of support the department can provide after much of the federal government has endured staffing and program cuts at the direction of DOGE. But as happened in 2023, it’s always possible for politicians in Washington to avert a shutdown at the last possible moment.
