How the Government Shutdown Could Impact Mortgages, Rates, and Flood Insurance
Homebuyers and homeowners concerned about the government shutdown can take some comfort — many key mortgage programs remain operational.
Mortgage lending continues for most borrowers
Fannie Mae and Freddie Mac have announced temporary policies to support borrowers whose income or employment is affected by the shutdown. Lenders have more flexibility verifying employment and income so that applicants aren’t penalized for furloughs or delays in federal processing. Loan servicers can also offer forbearance plans to help homeowners temporarily pause payments and avoid foreclosure.
Because Fannie Mae and Freddie Mac do not rely on congressional funding, they continue to buy and securitize conventional loans. Most private lenders, banks, and credit unions are also expected to operate normally. However, borrowers using government-backed programs through the FHA, VA, or USDA may experience delays. Most FHA loans are still being endorsed, but certain programs such as reverse mortgages are paused. The VA continues to process home loan benefits, while the USDA has temporarily suspended new rural housing loans and scheduled closings.
Economic data delays may influence interest rates
The shutdown has already disrupted the release of important federal economic data that the Federal Reserve relies on to guide interest rate policy. Policymakers and economists are expected to depend more on private reports for now. For example, a recent ADP report showed a drop in U.S. payrolls, suggesting a cooling job market — news that pushed 10-year Treasury yields to a two-week low. Since mortgage rates often track Treasury yields, this could influence rate movement in the near term.
Mortgage expert Melissa Cohn of William Raveis Mortgage noted that rates won’t be immediately affected by the shutdown but could rise if it drags on and investors begin to worry about U.S. credit quality. For now, rates remain relatively stable, with the 30-year fixed mortgage averaging 6.3% last week, according to Freddie Mac.
Flood insurance delays expected
One of the most significant housing-related impacts of the government shutdown is the lapse in authorization for the National Flood Insurance Program (NFIP), which insures about 5 million homes nationwide. When the NFIP isn’t authorized, homeowners can’t buy new policies or renew existing ones, although current policies remain valid until their expiration date.
This gap is especially serious for buyers purchasing in federally designated flood zones, where flood insurance is required to close a mortgage. Some lenders may accept private flood insurance in the interim, but availability and coverage can vary. The National Association of Realtors estimates that a lapse in the NFIP could affect about 1,300 property sales per day — roughly 40,000 closings each month.
Experts recommend that homeowners and buyers stay in close contact with their lenders and insurance agents, keep records of renewal attempts, and understand their options for coverage. Claims on existing NFIP policies will still be paid as long as the policy was active before the lapse.
Takeaway: What Buyers and Homeowners Should Know
While most mortgage activity continues as usual, some areas of the housing market are feeling the ripple effects of the shutdown. Borrowers using government-backed loans may face slower processing times, and those in flood-prone areas could encounter delays in insurance renewals or closings.
For now, mortgage rates remain steady, and key programs through Fannie Mae and Freddie Mac are operating normally. The best approach is to stay proactive — communicate with your lender, confirm timelines early, and ensure all documentation is ready in case the shutdown continues.