Government Shutdown Impacts Both Lenders and Borrowers

October 1, 2013, Senior Housing News - A looming government shutdown would impact lenders and borrowers working with Department of Housing and Urban Development programs—including those with healthcare facility projects—to varying degrees depending on how long a potential lapse in appropriation ability lasts and each loan's status, reveals a contingency plan released Friday.

HUD will still close loans through the Office of Healthcare Programs in the event of a government shutdown, but only for those with mortgage insurance commitments issued before the shutdown, the agency said in the contingency plan that addresses questions asked by lenders and borrowers. However, staffing will be "extremely limited" with new activity put on hold for many programs.

"The Office of Healthcare Programs will have minimal staff on board to conduct closings of projects with firm commitments for insurance issues prior to Sept. 30, 2013," says the plan.

Because of limited staffing, the processing or closing of FHA-insured loans are expected to undergo delays, says the agency. The longer the shutdown lasts, the more serious the impact will be.

Loans have already been put on hold after HUD exhausted its commitment authority in September for fiscal year 2013.

Construction inspections of healthcare projects would not continue during a shutdown, and all review and underwriting activities of applications and pre-applications would cease.

HUD is extending the deadline for the Service Coordinator notice of funding availability to November 16 to match the Assisted Living Conversion Program NOFA deadline, and applications will not be processed until after that date.

For Section 8 contracts that have permanent or indefinite authority or multi-year funding, HUD will continue to make payments only where there is budget authority available from prior appropriations or recaptures. Section 8 waiver requests will not be processed.

The only multifamily development projects HUD will close during the potential shutdown period are those with firm commitments and a scheduled closing date, or projects with "critical external deadlines."

The same is true for Section 202 Supportive Housing for the Elderly projects: only those with firm commitments and a scheduled closing date during the shutdown period would get closed.

Nearly all 80 local HUD field offices will be closed in the event of a government shutdown, with some limited exceptions. There will be an "extremely limited" number of employees to answer emergency questions.

However, the contingency plan does list the names and contact information for HUD workers for those with healthcare program projects inquiring after how the shutdown will affect them.

Read the HUD Contingency Plan for Possible Lapse in Appropriations.

Written by Alyssa Gerace