Federal employees across the country may be affected by the federal government shutdown, including employees who work for government contractors, vendors, and other businesses that rely on work from government agencies or that offer goods and services to members of the government workforce in their localities, according to the recent Fannie Mae Lender Letter (LL-2025-03).

“We are providing temporary guidance on selling and servicing policies that may be impacted by the federal government shutdown that began Oct. 1,” Fannie Mae stated in its letter. “These temporary policies are effective immediately upon the government shutdown and will automatically expire when the federal government resumes full operations.”

Fannie Mae is also reminding that Selling Guide B7-3-06, Flood Insurance Requirements for All Property Types, and Servicing Guide B-3-01, Flood Insurance Requirements Applicable to All Property Types, contain the policies that lenders and servicers must follow in the event of a lapse of funding for the National Flood Insurance Program.

“This Lender Letter does not affect lenders’ or servicers’ obligations to comply with requirements of applicable law, including compliance with ‘ability to repay’ standards in the Truth in Lending Act,” Fannie Mae said. “Lenders and servicers should consult with legal counsel on such matters.”

Another reminder the GSE pointed out is that a loan is not rendered ineligible for purchase or securitization by Fannie Mae solely based upon the shutdown.

“The following guidance relates to our standard employment policies for such individuals,” Fannie stated. “Verification of employment (VOE): Lenders should continue to attempt to obtain the verbal VOE before delivery of the loan as required in B3-3.1-07, Verbal Verification of Employment.”

Fannie Mae believes VOEs for the majority of government employees and other workers impacted by the shutdown will continue to be readily available from automated systems or third-party service providers if:

• The lender is unable to obtain the verbal VOE due to the shutdown, we will waive the verbal VOE requirement if the lender documents the loan file with a written statement describing
• The steps the lender took to obtain the verbal VOE, and that the requirement could not be met as a direct result of the shutdown.
• The lender warrants that the borrower is employed at the time the loan is delivered to Fannie Mae unless employment has been validated by the Desktop Underwriter (DU) validation service.
• Validation of employment by the DU validation service will result in loans remaining eligible for representation and warranty relief provided the lender complies with the “close by” date in the DU message and the requirements in B3-202, DU Validation Service. Otherwise, the standard guidance provided above related to obtaining a VOE will apply.
• For borrowers in the military whose employment is not validated by the DU validation service, the Selling Guide currently allows for a Leave and Earnings Statement dated within 120 calendar days prior to the note date in lieu of a verbal VOE.
• If a borrower is furloughed, the loan remains eligible for sale, provided the lender has been able to obtain all required income documentation prior to delivery of the loan. Income documentation must continue to meet our Selling Guide requirements for age of credit documents in B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns.

The requirements for temporary leave income in B3-3.1-09, Other Sources of Income, do not apply to borrowers who have been furloughed.

As to paystubs, Fannie is waiving the requirement that the paystub be dated no earlier than 30 days prior to the initial loan application date as required by B3-3.1-02, Standards for Employment Documentation. Lenders must continue to comply with all other requirements in that topic, including obtaining the most current paystub that reflects year-to-date earnings.

“In some instances, we require validation through a government agency, such as the IRS and the Social Security Administration, for certain documentation or information provided by the borrower,” Fannie Mae said. “During the shutdown, these requests may be delayed or unable to be processed. In the event IRS operations are impacted due to the shutdown, certain policies will apply.

“While we require lenders to have each borrower whose income is being used for qualifying complete and sign an IRS Request for Transcript of Tax Return (Form 4506-C), or an alternative form or process (unless all of a borrower’s income has been validated by the DU validation service), we do not require lenders to obtain tax transcripts from the IRS prior to closing,” Fannie added. “However, we do require the lender to obtain certain IRS documents if the most recent year’s tax return is not obtained as outlined in B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns. In the event the lender is not able to meet these requirements prior to loan delivery, the loan is not eligible for sale to Fannie Mae.

Fannie Mae requires lenders to submit Form 4506-C or an alternative form or process that authorizes the release of comparable tax information to the IRS to request tax transcripts as part of the post-closing quality control processes (unless all borrower income has been validated through the DU validation service) in D1-3-02, Lender Post-Closing Quality Control Review of Approval Conditions, Underwriting Decisions, and Documentation. 

“Because lenders have 90 days to complete a full post-closing QC cycle, we do not expect the government shutdown to impact the lender’s ability to obtain the tax transcripts within that timeframe,” Fannie Mae pointed out. “To assist borrowers who are unable to make their monthly contractual payment as a result of the shutdown, we are reminding servicers that they are authorized to evaluate the borrower for a forbearance plan in accordance with Servicing Guide D2-3.2-01, Forbearance Plan.”

Additionally, a borrower who is currently performing on a repayment plan or a Fannie Mae Flex Modification Trial Period Plan and is impacted by the shutdown may seek consideration for a forbearance plan. If the borrower does convert from a repayment plan or a Trial Period Plan to a forbearance plan, the borrower may subsequently be eligible for a workout option upon successful completion of the forbearance plan, Fannie concluded.