The current deadline to fund the federal government is September 30^th, and with 10 days left, Congress is not close to any agreement on how to move forward. Negotiations in Congress continue, and it's possible a shorter-term funding plan could be approved before the deadline. But given the uncertainty and the possibility of a more protracted shut-down, banks need to be aware of the potential impact on our customers. In addition to the general federal budget, September 30^th is also the deadline for Reauthorization of the National Flood Insurance program, and the Farm bill. Unless there is some short-term reauthorization of these programs soon, they will lapse causing significant disruption.

• Banking Agencies. The federal banking agencies are not funded through congressional appropriations so will remain open. Others, such as the Securities and Exchange Commission, CFTC, and Treasury Department agencies like the IRS and FinCEN, may need to halt some or most operations.
• Lending Programs. The Small Business Administration, Federal Housing Administration and others with lending programs funded by the federal government will likely be at least partially closed. That means loans requiring those offices’ approval may not be processed.
• Regulatory Guidance. When this happened last, regulators urged financial institutions to work constructively with borrowers experiencing difficulties because of a partial government shutdown, just as they do following severe weather events. We would expect them to do the same if there is a protracted closure.
• Federal Employees/Contractors. Federal employees and contractors are most directly affected by a shutdown. OBL is recommending that any individuals or businesses impacted contact their financial institution to discuss their specific situation. If the impasse is prolonged, we encourage you to continue to work with federal employees and other individuals and small businesses impacted by the shutdown’s ripple effects during their time of need.
• Lending Support. Verification resources from certain government agencies, such as tax transcripts from the IRS, may not be available. This could mean delays in mortgage loan approvals and, if the shutdown is protracted, could eventually affect closing dates.
• Flood Insurance. The National Flood Insurance Program’s funding is tied to the continuing resolution that has stalled in Congress. That means that the authority of FEMA to issue flood insurance policies under NFIP will lapse with the shutdown. Lenders should be prepared and have a plan to avoid the potential disruption to loans scheduled to close during a lapse. Loans that require flood insurance can still close during a lapse in the NFIP, either by following certain NFIP and regulatory guidelines and ensuring that a system is in place to obtain NFIP policies as soon as the program is reauthorized, or by obtaining private flood insurance. The prudential regulators—the FDIC, OCC, and Federal Reserve—have each released guidance on what to do if the NFIP lapses. This guidance was originally issued in 2010, but remains applicable in the event of any lapse, even with the availability of private flood coverage.
• Farm Bill Impact. The farm bill, which is negotiated every five years, has the same September 30^th expiration date and is unlikely to pass before the deadline. Without a short-term extension of the farm bill programs, farmers and their banks will see a lapse in vital programs. The federal crop insurance program and U.S. Department of Agriculture's guaranteed-loan programs will both be affected by the Congressional impasse.

If you have any questions about the government shutdown, please contact Evan Kleymeyer at 614-340-7605.