Black Swans Everywhere: Baseline Chaos 2025 — Flood Insurance & Federal Worker Fallout in the Government Shutdown

Introduction

Another government shutdown has arrived, and while we’ve seen these before, 2025 feels different. In the last major shutdown (2018–2019), borrowers faced delays with IRS transcripts, Social Security checks, FHA case numbers, VA verifications, and USDA underwriting. This time, two issues stand out with even greater urgency: furloughed federal workers and flood insurance coverage lapses.

📺 Watch my full video breakdown below:
(embed YouTube video here)

Federal Workers: Income Verification Roadblocks

For most conventional loans, the shutdown won’t completely stop closings. But for government employees, furloughs create a serious problem.

Lenders must verify stable income before approving or closing a loan. A furlough — even if temporary — can cause underwriters to flag the income as “unstable,” delaying or jeopardizing approval.

FHA, VA, and USDA loans face an even steeper climb. These loans often require human review at the agency level, and with staff furloughed, critical steps like case number assignments or eligibility confirmations may stall.

The result? Federal workers are facing both personal income verification challenges and slower agency processing at the same time.

Flood Insurance: The Biggest Bottleneck

The larger and more immediate issue is flood insurance.

During a shutdown, the National Flood Insurance Program (NFIP) cannot issue new policies or renew expiring ones. That creates a hard stop for closings in flood zones because:

• New buyers can’t get required coverage.

• Homeowners with expiring policies can’t renew.

• No exceptions exist. Lenders are legally required to maintain continuous flood coverage.

If a policy lapses, lenders are forced to “force-place” insurance. This coverage is more expensive, protects the lender’s interest more than the borrower’s, and raises monthly costs — all through no fault of the borrower.

What Borrowers Should Do Now

This is where being proactive matters.

✅ Check your flood insurance expiration date immediately.
✅ Call your loan servicer before your policy expires. Ask:

• Do you offer a grace period?

• Can I use private flood insurance temporarily?

• How will force-placed coverage work if NFIP stays frozen?

Document every call and keep written proof of your renewal attempt. If Congress restores NFIP later, you can switch back and cancel the costly force-placed policy.

Why 2025 Is Different From 2018–2019

This isn’t just a repeat of the last shutdown. Several factors make 2025 more disruptive:

• Deeper staffing cuts: Agencies and lenders entered this year already lean. Furloughs stack onto earlier layoffs.

• No economic data releases: Without jobs reports or inflation updates, markets are flying blind. That increases rate volatility.

• Federal Reserve timing: Unlike 2018–2019, the Fed may be cutting rates during this shutdown, creating additional uncertainty.

• Flood insurance risk: With more homes in flood-prone zones and higher awareness from lenders, lapses will bite harder than last time.

Put simply: rare disruptions aren’t rare anymore. They’re baseline chaos.

Final Word

For most conventional borrowers, the impact will be minor. But for federal workers and anyone tied to flood insurance, this shutdown could cause real delays, added costs, or stalled closings.

You can’t control political gridlock, but you can control preparation. Stay in close contact with your lender, check your flood policy dates, and reach out to your servicer before you hit expiration. In times of baseline chaos, the most prepared borrowers fare best.

📺 Watch my full video here for details on how this shutdown compares to 2018–2019 and what it means for FHA, VA, and USDA borrowers:
(embed video again here for call-to-action)

🧾 Borrower FAQ: Government Shutdown 2025

Q: If I’m a government worker on furlough, will my mortgage be denied?
Not automatically. But lenders may delay or re-review your application because your income is temporarily “unstable.” Be upfront with your loan officer and provide documentation.

Q: My flood insurance policy is expiring. What should I do?
Call your loan servicer immediately. Ask about grace periods, private coverage options, and how force-placed insurance would work. Keep a record of your attempt to renew.

Q: Can I close on a home in a flood zone without insurance?
No. Lenders are legally prohibited from closing without proof of active coverage.

Q: What if my servicer force-places insurance during the shutdown?
You’ll have higher monthly costs, but once NFIP is reauthorized, you can switch back and often get refunds for overlapping coverage.

Q: Will this shutdown affect mortgage rates?
Possibly. With no economic data releases, markets may see increased volatility. Add in potential Fed rate cuts, and uncertainty will remain high.