Potential Government Shutdown -- Issues with Closing?

[Anonymous]

We (two Feds) are considering making an offer on a home in D.C. with a closing date of mid October. Our lender says we're very well qualified, and we would have a good amount of cash reserves after closing (more than a years worth of mortgage payments). To be competitive our realtor says we need to waive all contingencies, and I have no doubt this is the case. There were two nearly identical homes in the area we're looking at that sold for 300-400k over asking. We've also lost out on multiple homes over the summer. Is there a possibility that a government shutdown on 1 October would prevent us from closing, and that we'd lose our EMD? If so, why might that be the case? Because we may not be getting paid, or is there some other reason I may not be aware of? It's so hard to predict whether a government shutdown will happen nowadays, but it appears one is possible: https://www.washingtonpost.com/us-policy/2021/09/20/congress-shutdown-debt-ceiling-biden/

How are other Feds in the market for a home handling this issue? Or is this not something we should be concerned about?

[Anonymous]

I'm a Fed, and we closed on our house during the 2019 shutdown with no issues. I think that, as a result of that shutdown, there is now a law that guarantees back pay. So, my guess is that you will have no issues, but it would be a good idea to confirm with your mortgage broker just in case.

[Anonymous]

Anonymous wrote:I'm a Fed, and we closed on our house during the 2019 shutdown with no issues. I think that, as a result of that shutdown, there is now a law that guarantees back pay. So, my guess is that you will have no issues, but it would be a good idea to confirm with your mortgage broker just in case.

Yes. I believe this is the case.

[Anonymous]

Anonymous wrote:I'm a Fed, and we closed on our house during the 2019 shutdown with no issues. I think that, as a result of that shutdown, there is now a law that guarantees back pay. So, my guess is that you will have no issues, but it would be a good idea to confirm with your mortgage broker just in case.

Wouldn’t hurt to double check with your broker, but in general being a career fed is one of the most secure income sources (shutdowns notwithstanding). Your lender shouldn’t be too concerned, I wouldn’t think.

[Anonymous]

The bigger issue could be whether you have an FHA/VA/USDA loan. These gov't shutdowns have the potential to mess with agency application processing and loan endorsement.

[Anonymous]

you could always put an addendum into your offer that the closing clock stops in the case of any government shutdowns that affect financing.

[Anonymous]

There’s something that underwriting needs from the IRS - I forget exactly what - that will affect everyone who’s trying to close.

[Anonymous]

Anonymous wrote:I'm a Fed, and we closed on our house during the 2019 shutdown with no issues. I think that, as a result of that shutdown, there is now a law that guarantees back pay. So, my guess is that you will have no issues, but it would be a good idea to confirm with your mortgage broker just in case.

I also closed in February 2019 and unless your lender was your uncle I guarantee you had “no issues”. It was a nightmare. Yes, by then congress said we would get back pay but because there was no end in sight/no knowledge of when that back pay would come, we could not close if we were not *currently* receiving a paycheck (even though neither of us were furloughed). We moved up our closing date the minute the government opened so we wouldn’t risk it closing again before our original close date.

Bottom line, it was a nightmare. Have a good relationship with your lender.

[Anonymous]

The government isn't going to shutdown (this year at least).

-Dirty lobbyist

[Anonymous]

Anonymous wrote:

Anonymous wrote:I'm a Fed, and we closed on our house during the 2019 shutdown with no issues. I think that, as a result of that shutdown, there is now a law that guarantees back pay. So, my guess is that you will have no issues, but it would be a good idea to confirm with your mortgage broker just in case.

I also closed in February 2019 and unless your lender was your uncle I guarantee you had “no issues”. It was a nightmare. Yes, by then congress said we would get back pay but because there was no end in sight/no knowledge of when that back pay would come, we could not close if we were not *currently* receiving a paycheck (even though neither of us were furloughed). We moved up our closing date the minute the government opened so we wouldn’t risk it closing again before our original close date.

Bottom line, it was a nightmare. Have a good relationship with your lender.

I'm the PP and I'm surprised to hear that. I emailed our (local but non-uncle) broker right away when the shutdown happened and within 8 hours got an email that just said something like "thank you for your service, there should be no issue.". We definitely couldn't qualify on one income at the time so maybe it just varied by bank?

[Anonymous]

As long you are still employed I’m not sure a shutdown would be on a bank’s radar as a problem or even if it was that they would care.

[Anonymous]

Are you sure you'd actually get shut down? I'm a fed and we always operated off reserve or did work on previous FY budgets. I've never actually been shut down.

[Anonymous]

Anonymous wrote:Are you sure you'd actually get shut down? I'm a fed and we always operated off reserve or did work on previous FY budgets. I've never actually been shut down.

Not all agencies and departments operate that way. My agency did indeed shut down, and we stopped receiving pay until it was over.

[Anonymous]

Anonymous wrote:There’s something that underwriting needs from the IRS - I forget exactly what - that will affect everyone who’s trying to close.

Yup. IRS Form 4506-C, re: income verification. Last shutdown it caused delays until Treasury designated employees that process the requests "essential".

[Anonymous]

OP here. We checked with our lender and we were told that we wouldn't be able to close if there is a shutdown and income/employment can't be verified. Whether the buyer is furloughed doesn't necessarily matter to our lender. Each shutdown is different and our lender noted that whether income and employment verification can happen may vary shutdown to shutdown and agency to agency. It did cause problems for some (but not all) federal employee buyers who didn't anticipate a the last shutdown, apparently. While we haven't decided what to do going forward, I thought it best to respond and let others know given some of the varied responses on this thread. Feds should obviously talk with their lender and evaluate their own risk tolerance if they want to waive the financing contingency in the coming days. Hopefully the CR is passed soon...