Partial Shutdown Begins, Raising Concerns About Mortgage Delays and Flood Insurance Lapses

Even though the U.S. Senate passed a spending bill to fund most federal agencies through September 30, 2026, a partial government shutdown began at 12:01 a.m. on Saturday, Jan. 31.

It is still unclear how quickly the House of Representatives will vote on the Senate’s bill.
 

What parts of government are affected?

The shutdown impacts several major federal departments, including:
 

• Defense
• Treasury
• State
• Health and Human Services
• Labor
• Housing and Urban Development (HUD)
• Transportation
• Education

The White House and leaders in both political parties say they want to avoid a long shutdown like the one that happened last fall.

The House could vote as early as Feb. 2 on the Senate bill to reopen the government for the rest of fiscal year 2026.

One exception would be the Department of Homeland Security, which would only receive short-term funding for two weeks while lawmakers negotiate changes.
 

How could this affect housing?

If the shutdown is brief, the housing market may see only limited disruption. But if it lasts several weeks or longer, it could:
 

• Make it harder for people to get mortgages
• Reduce demand for homes

Even in the short term, people involved in housing-related federal programs should expect slower service and delays, even for programs that continue running.
 

National Flood Insurance Program (NFIP): A Major Immediate Concern

One of the biggest housing-related issues involves the National Flood Insurance Program (NFIP).
 

• During the shutdown, the authority to issue new flood insurance policies has expired.
• This can delay new home sales and policy renewals for property owners who have federally backed mortgages and live in a Special Flood Hazard Area.
• These delays could cause uncertainty and may even lead to cancelled home sales.

Policies that were started before Jan. 30 will still remain valid until the end of their normal one-year term.

In past situations, Congress has often renewed the NFIP after a lapse and applied it retroactively, but there is no guarantee that will happen this time.

If NFIP is not renewed retroactively, it could affect the start dates of policies once the program begins issuing policies again.
 

Federal Programs That May Be Affected (Housing-Related)

 

Department of Housing and Urban Development (HUD)

 

• FHA single-family loans will continue in the near term, but people should expect delays in processing and closing.
• FHA multifamily projects with firm commitments and closings already scheduled may move forward, but no new firm commitments will be issued.
• HUD will keep making payments under previously approved programs, including:
  • Section 8 contracts
  • Section 236 agreements
  • Section 202 and 811 Project Rental Assistance Contracts (PRAC)
  • Section 811 Project Rental Assistance (PRA)
• HUD will continue processing rental subsidy renewals only if funding authority is available from earlier appropriations or recovered funds.
• NSPIRE inspections will happen only in limited cases, such as:
  • When the mortgage servicer is responsible for the inspection, or
  • When inspection contract funding was already committed before the shutdown, or
  • When there may be a threat to life or property.
• Funds from programs like CDBG and HOME may still be distributed when not doing so would create a serious risk to life, safety, or property.
• Approved drawdowns for certain community planning programs using pre–FY2026 funds (including homeless assistance, CDBG, HOME, and HOPWA) are expected to continue unless HUD staff action is required to approve a voucher or clear a system issue.

 

Department of Homeland Security

E-Verify is not available during the shutdown. Employers may not be able to log in or use their E-Verify accounts to confirm employees’ work eligibility.
 

Occupational Safety and Health Administration (OSHA)

OSHA enforcement and investigations will be greatly reduced.

OSHA will mainly respond to immediate danger situations and emergencies, including major workplace accidents and fatalities.
 

Department of Labor

The department is likely to stop processing foreign labor certifications, including those needed for the H-2B temporary worker program.
 

Internal Revenue Service (IRS)

 

• Some lenders require mortgage applicants to submit IRS Form 4506-T to confirm income and Social Security information.
• With the IRS shut down, this could lead to serious delays in some mortgage approvals.
• IRS taxpayer services will be suspended:
  • No tax refunds will be issued
  • Taxpayers will not be able to call the IRS for help or advice

 

Bottom line

A short shutdown may only cause minor housing disruptions, but a longer one could create bigger problems—especially by slowing mortgage processing and delaying flood insurance coverage.

Builders, buyers, and housing professionals should prepare for delays and monitor updates as the situation changes.

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