July 24, 2024

Congress takes an important step toward funding agreement, but time is short for housing agencies

Partisan rancor in Congress seems a sure thing in U.S. politics these days, but there is a sign of hope for compromise.

Over the weekend, leaders including Speaker of the U.S. House of Representatives Mike Johnson (R-La.) and U.S. Senate Majority Leader Chuck Schumer (D-N.Y.) made separate announcements saying that an accord had been reached for funding the government this year.

Details from both a joint announcement by Schumer and Rep. Hakeem Jeffries (D-N.Y.) and a letter to colleagues from Johnson indicated the deal was largely in line with a spending deal reached between President Biden and Former Speaker of the House Kevin McCarthy (R-Calif.) last spring.

“[T]he concessions we achieved will include an additional $10 billion in cuts to the IRS mandatory funding (for a total of $20 billion), which was a key part of the Democrats’ ‘Inflation Reduction Act,’” Johnson’s letter – obtained by Punchbowl News – explained. “In addition, we will cut $6.1 billion from the [Biden] Administration’s continued COVID-era slush funds, which we achieved despite fierce opposition from the White House.”

Schumer emphasized the preservation of spending priorities for Democrats that will be maintained. The deal helps protect “key domestic priorities like veterans benefits, health care and nutrition assistance from the draconian cuts sought by right-wing extremists,” the Democrats’ announcement said as reported by The Hill.

However, time is running out for both chambers of Congress to wrangle votes, pass bills, reconcile them and get them to President Biden’s desk to become law. A partial government shutdown will take place on Jan. 19 if Congress cannot push its accord through.

A government shutdown would present unique challenges for the reverse mortgage industry, especially in comparison to the traditional mortgage business. With no appropriations, the Federal Housing Administration (FHA) would be unable to endorse new Home Equity Conversion Mortgage (HECM) loans for FHA insurance, though other FHA loans would still be eligible for endorsement.

However, payments to HECM borrowers would continue at the Office of Single Family Housing, since such payments fall under the standard of “the minimum operations necessary to support FHA’s existing portfolio” according to the U.S. Department of Housing and Urban Development (HUD)’s current contingency plan in the event of a lapse in appropriations.

Reverse mortgage professionals largely breathed a sigh of relief last fall when the last temporary funding deal was reached, but several industry professionals who spoke with RMD at that time expressed frustration at political leaders.

“[A shutdown] would have had some perhaps minimal impact on the reverse mortgage industry if it was short-term, but is this a harbinger of what to expect next time when the issues may be greater?,” said George Downey, regional SVP at the Federal Savings Bank in Braintree, Mass. when asked about the last agreement reached by Congress this past October.

The length of a shutdown could also present problems, according to reverse mortgage educator Dan Hultquist.

“Although unlikely, a prolonged government shutdown could eventually cause issues that could disrupt new loan originations,” Hultquist said in October. “For example, if a prolonged shutdown impacts liquidity in the mortgage business, lenders may be hesitant to close loans until the shutdown is resolved.”

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