Government Shutdown - Impact on New Mortgages

The Government Shutdown is impacting new mortgages. 

In short, the situation is continuously evolving. Among the effects to NEW MORTGAGE LOANS being originated are as follows:

1. Upcoming Reserve Requirements - Starting with all application dates of Monday, November 3, 2025 or later (until the Government Shutdown is resolved), Fannie Mae & Freddie Mac will begin requiring reserves for all transactions where Borrowers are either employed by the Federal Government, or their employment is directly impacted by the shutdown. The loan must have the GREATER of: 
   • 2 Months of documented reserves of the new proposed housing payment (Principal, Interest, Property Taxes, Homeowners Insurance, plus (if applicable) HOA Dues, Private Mortgage Insurance and/or Special Assessments such as Mello Roos).
   • Or the amount of reserves required by DU/LP
   • NOTE: If the source of reserves is non-liquid (such as retirement funds), Lenders may consider them liquid if supported by documented terms of withdrawal
2. Flood Insurance Requirements
   • Effective immediately, for Fannie/Freddie loans, Lenders may follow agency guidelines for closing loans that require flood insurance during the Government Shutdown:
     • Properties located in Special Flood Hazard Areas must have flood insurance coverage or acceptable evidence of pending insurance.
     • If a Borrower applies for NFIP flood insurance, acceptable evidence pending issuance of a final NFIP policy may include one of the following:
       • A completed and executed NFIP Flood Insurance Application plus a copy of the Borrower's premium check or agent's paid receipt.
       • A completed and executed NFIP Flood Insurance Application plus the final Settlement / Closing Disclosure Statement reflecting the flood insurance premium collected at closing, or
       • A completed and executed NFIP General Change Endorsement Form showing the assignment of the current flood insurance policy by the property Seller to the Borrower.
3. Short-Term Military Assistance Loans
   • Some Lenders have stepped up to offer short-term, zero-interest loans to military service members to cover for the lapse in pay during the Government Shutdown.
   • These loans must be considered as unsecured debt for underwriting purposes. Proceeds of these loans CANNOT be used for funds-to-close, and the debt must be considered as part of the Debt-to-Income (DTI) Ratio.
   • If no loan agreement is available, the debt payment will be calculated assuming 5% interest.

This situation is ever-evolving and updates, revisions, and/or deletions remain possible moving forward.