Shutdown Causes Federal Employee’s Mortgage Application to Be Denied Which Leads to New Bill

Legislation has been introduced to encourage banks to work with federal employees impacted by government shutdowns.

Legislation has recently been introduced in the House that would require financial regulators to issue guidance that encourages banks and other financial institutions to work with federal employees, businesses and other consumers affected by future federal government shutdowns.

The Shutdown Guidance for Financial Institutions Act (H.R. 2290), as the bill is known, was introduced by Congresswoman Jennifer Wexton (D-VA).

Wexton said she introduced the bill because a federal employee who was furloughed in the latest partial government shutdown was denied a mortgage by her lender who considered her unemployed and therefore too much of a risk to offer her a loan. Wexton said this was wrong and should not have happened.

“I came to Congress to advocate for my constituents,” said Wexton. “I heard directly from one who was denied a mortgage due to a government shutdown she couldn’t control—and I knew there were many more stories like hers. Federal workers and contractors are expected to shoulder the financial burdens incurred from a government shutdown they can’t control or predict.”

The Shutdown Guidance for Financial Institutions Act would ensure financial institutions receive guidance from the federal government to encourage financial institutions to:

  • Work with consumers and businesses affected by a shutdown;
  • Recognize that consumers and businesses affected by a shutdown may lose access to credit and face temporary hardship in making payments on debts such as mortgages, student loans, car loans, business loans, or credit cards;
  • Consider prudent efforts to modify terms on existing loans or extend new credit to help consumers and businesses affected by a shutdown, consistent with safe-and-sound lending practices; and
  • Take steps to prevent adverse information being reported and utilized in any manner that harms consumers affected by a shutdown, including by preventing modified credit arrangements intended to help consumers fulfill their financial obligations from being reported to, and coded by, consumer reporting agencies on a consumer’s credit report in a manner that hurts the creditworthiness of the consumer.

Under the wording of the proposed bill, it does not suggest that financial institutions would be forced to modify existing loan terms or give loans to furloughed federal employees, but rather that the institutions “consider prudent efforts to modify terms on existing loans or extend new credit to help consumers and businesses affected by a shutdown, consistent with safe-and-sound lending practices.”

The bill stipulates that federal financial regulators would provide this guidance no later than the end of the 24-hour period beginning at the start of a shutdown.

Other Approaches to Help Federal Employees Financially in Shutdowns

Other proposed bills have offered varying approaches to help federal employees with their finances in shutdowns.

One bill introduced by Senator Brian Schatz (D-HI) took a more forceful approach than Wexton’s bill. Schatz’s bill would require credit bureaus to remove negative information that was placed on the credit reports of federal workers and contractors who missed payments as a result of a government shutdown.

Other bills have proposed making it easier for federal employees to tap into their TSP accounts during partial government shutdowns. The Shutdown Relief Act, introduced by Congressman Elaine Luria (D-VA), would allow federal employees to withdraw up to the amount of their missed shutdown pay without penalty from their TSP accounts as long as the funds are returned within 180 days.

The recent shutdown led to a flurry of these kinds of bills being introduced as lawmakers rushed in to help their federal employee constituents, but to date none have been enacted.

The Shutdown Guidance for Financial Institutions Act

About the Author

Ian Smith is one of the co-founders of He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.