WASHINGTON The NCUA will remain open in the event of a government shutdown, but the ongoing fiscal battle in Congress still could have significant implications for the credit union community.
The CU regulator’s status as an independent agency funded by credit unions, not through the federal government’s budget process means examinations would be conducted on time. Most NCUA examiners work out of their homes, the agency said, and staff will be available for inquiries and assistance.
That is what happened during the last protracted government shutdown in 1995, when the agency worked through. NCUA has navigated brief government shutdowns several times since then, too. The agency’s Alexandria offices are owned by NCUA and its adjunct regional offices are leased and would not be affected by a shutdown, according to the agency.
The shutdown will go into effect after midnight Eastern Time tonight, the end of the fiscal year, unless lawmakers in the House and Senate are able to strike a last minute deal to at least temporarily fund the government for several more weeks.
The two chambers remained at an impasse Monday over House Republicans' efforts to use the fight as an opportunity to defund or delay President Obama's healthcare law.
Analysts predicted it is likely the government will have to shutter its doors, though for how long is unclear. Such an event raises questions about mortgage and small business loans and the broader impact on the economy.
Here is a guide to how a shutdown would affect the credit union community:
* FHA and SBA loans will stop
* CUs that make government-guaranteed mortgage or small-business loans could feel the impact of the shutdown immediately.
* The U.S. Small Business Administration and the Federal Housing Administration will largely stop processing loan applications if the government is closed, resulting in potential backlogs at CUs that originate the loans.
The SBA said in its 36-page shutdown plan that it will shutter all of its loan programs except one that makes direct loans to home and business owners affected by natural or man-made disasters. In its two main programs, 7(a) and 504, the SBA provided guarantees on more than 55,000 loans last year totaling more than $30 billion in fiscal year 2012 and was on pace to approve similar volumes in fiscal year 2013. The SBA said nearly 2,200 of its employees, or 62% of its workforce, will be furloughed.
Complicating matters is that several new SBA rules take effect Tuesday, the start of the new fiscal year, including one that will eliminate fees on all SBA loans of less than $150,000. Business owners that waited to apply for the loans to avoid the guarantee fee will have their applications put on hold until the shutdown ends.
The FHA, meanwhile, will be unable to underwrite and approve new loans, according to a report from the Department of Housing and Urban Development, which oversees the agency. However, Ginnie Mae, which guarantees timely payments to investors in government-insured mortgage-backed securities, will continue operating. Fannie Mae and Freddie Mac also will also be largely unaffected.
For the most part, HUD will maintain minimum operations during a shutdown. As a result, FHA lenders cannot be assigned case numbers for new loans and they take some risk in closing loans since they do not know when the government will reopen. A loan has to be submitted to FHA within 60 days of closing to receive insurance.
"An interruption in operations would create immediate and significant market disruption that would lead to financial losses for investors and increased mortgage rates for government-insured mortgage loans," HUD said in a 67-page report detailing the impact of a shutdown.
Only 350 of HUD's 8,700 employees will be working full-time during a hiatus, HUD said. But the agency anticipated another 400 employees will be able to work on an intermittent basis during the first few days of an appropriations lapse.