On January 11, Freddie Mac and Fannie Mae issued guidance regarding credit reporting during the government shutdown (see Bulletin 2019-2 and Lender Letter 2019-01). The guidance clarifies that servicers have flexibility when reporting the status of a mortgage loan to credit reporting agencies for a borrower affected by the shutdown, and are permitting, but not requiring, servicers to suppress credit reporting in these instances entirely.
On January 8, the Department of Veterans Affairs (VA) issued Circular 26-19-1, which encourages holders of VA-guaranteed loans to extend forbearance to borrowers in distress as a result of the government shut down. It also encourages servicers to waive late charges on loans where borrowers suffered income loss due the shutdown or who may have been affected due to the ripple effect of the shutdown and suspend credit reporting on the affected accounts. The VA also issued Circular 26-19-2, which clarifies that loans for borrowers directly impacted by the government shutdown are still eligible for guarantee by the VA, so long as the lender has obtained all the required documentation and the loan is current. The VA emphasizes that the furlough period should not be considered a break in employment for underwriting purposes provided the borrower returned to work in the same status and provides their furlough letter. Additionally, the VA reminds originators that, even though the IRS Form 4506-T is mentioned in the VA Lender’s Handbook as a condition of the Automated Underwriting Cases feedback certificate, that condition is an investor or lender overlay and the form is not actually required by VA guidelines. Lastly, if the Federal Emergency Management Administration (FEMA) is unavailable for routine certifications or correspondence regarding flood insurance, the VA reminds lenders that non-federal flood insurance policies are acceptable.