How a Federal Government Shutdown Can Impact FHA, VA, USDA, KHC and Fannie Mae Mortgage Loans in Kentucky
A federal government shutdown can create delays or temporary stoppages in specific steps of the mortgage process. For Kentucky homebuyers using FHA, VA, USDA/Rural Housing, KHC, or Fannie Mae conventional financing, certain functions rely directly on federal employees, federal systems, or federal verifications. Below is a clear breakdown of how each program is affected during a shutdown, based on past shutdowns and agency guidance.
FHA Loans in Kentucky
- FHA loans can generally close as normal. FHA Connection remains available.
- Delays may occur if a file requires manual underwriting, case-level questions, or assistance from HUD staff.
VA Loans in Kentucky
- VA loans continue to close normally because the VA’s WebLGY system stays operational.
- Any task requiring direct VA personnel involvement (such as certain COE corrections) may see slower turnaround times.
Fannie Mae (Conventional Loans)
- Fannie Mae conventional loans typically move forward without major disruption.
- However, a shutdown may delay IRS tax transcripts or Social Security number validation required by the AUS findings.
USDA Rural Housing (RHS Guaranteed Loans)
- This is the program most severely impacted.
- Lenders cannot close a USDA loan without a valid RHS Conditional Commitment.
- If USDA staff are furloughed, Conditional Commitments and loan note guarantees are paused — causing closing delays in Kentucky until the government reopens.
KHC – Kentucky Housing Corporation
- KHC’s down payment assistance and programs remain active.
- KHC must follow agency rules for FHA, VA, USDA, and conventional loans during a shutdown.
Verification of Employment (VOE)
- Most lenders require a VOE within 10 days of closing.
- A shutdown can make it difficult to verify federal employees if their HR departments are unavailable.
- Conventional exceptions:
- Military borrowers may use a recent LES.
- Files validated through DU (Desktop Underwriter) may qualify without manual VOE steps if all conditions are met.
Flood Insurance / NFIP
- If the National Flood Insurance Program (NFIP) lapses, closings requiring flood insurance may be delayed.
- KHC follows each agency’s temporary flood guidance during shutdown periods.
Tax Transcripts & Social Security Validation
- If these items are required by the AUS or underwriter, they must be completed before closing.
- SSA-89 is used to validate Social Security numbers — delays may occur if federal processing is limited.
✅ UPDATE: Government Reopened — All Mortgage Operations Back to Normal
The federal government is now fully reopened, and all major mortgage-related systems and departments (FHA, VA, USDA, IRS, SSA, NFIP) are operating normally again.
This means:
- USDA Conditional Commitments are being issued again
- IRS tax transcripts are processing normally
- Social Security validations (SSA-89) are operational
- FHA and VA staff-supported functions are back on normal timelines
- VOE for federal employees is no longer restricted
If you have a loan in process or are planning to start one, everything is back to standard turn-times across Kentucky.
Joel Lobb – Mortgage Broker
FHA • VA • USDA • KHC • Fannie Mae
Call/Text: 502-905-3708
kentuckyloan@gmail.com
www.mylouisvillekentuckymortgage.com
NMLS #57916 | Company NMLS #1738461
Equal Housing Lender
The views and opinions expressed are for informational purposes only, not a commitment to lend. All programs subject to change and credit approval.
