What follows are a few of the issues that could arise as the U.S. approaches the start of its next fiscal year on Oct. 1, and some of the steps that mortgage companies can take if they do. 

1. Anticipate potential NFIP gaps for new buyers and renewals

If the government shuts down or the NFIP is not reauthorized before the deadline, new policies and renewals typically required in certain areas considered to be at risk of flooding won't be available. For homeowners that rely on the NFIP, claims will be paid on existing policies until they end.

"The real impact is to new buyers that are in flood zones, who could face delays at closing if they don't line up alternative solutions," said Jen Hightower, senior director of operations at the Baldwin Group. 

Baldwin is providing technology and back-end servicing for mortgage company New American Funding's insurance affiliate, which the chief operating officer of the recently formed unit said will put NAF in a good position to weather a shutdown if there is one.

"We feel a lot safer and more adept at being able to assist our borrowers navigating this potential challenge, and hopefully it won't happen, but we have to be prepared if it does," said COO Phil Miller, who also is vice president of strategic partnerships at New American Funding.

Step for lenders: Communicate proactively with borrowers in flood zones and explore temporary alternatives to avoid closing delays.

2. A larger private flood market might help some in a shutdown

If there is a government shutdown as a result of a federal budget impasse, some new flood coverage still may be obtainable in the private market, which has grown in recent years.

"It's difficult to speculate but I think as far as the insurance market, it has a better opportunity to be able to float through if there is a suspension of the government," said Brad Turner, vice president and national product manager for flood at Burns & Wilcox.

"Five years ago the private market wasn't ready. Now there's more of a private presence in flood," he said.

Regions with a historical precedent for flood loss such as coastal Louisiana would be the ones most likely to face challenges obtaining coverage in such circumstances, he said.

"The private market is set up to fulfill coverage on most risk but there are areas where there might be difficulty," said Turner, whose company is an independent insurance wholesale broker and managing underwriter.

Private flood coverage does in some cases offer "higher limits or broader coverage than the NFIP, but the availability of options depends on where you live and the level of risk," said Gregg Barrett, CEO of the Waterstreet Company, in a written statement. 

"The NFIP is still the only realistic choice for many households," he said.

Step for lenders: Identify private flood options for borrowers in high-risk areas as a backup to NFIP policies.

3. Factor in potential FEMA reforms

Homeowners may want to generally brace themselves for an environment where insurance could become more complicated while the NFIP's reauthorization is still up in the air and reform the Federal Emergency Management Agency could potentially follow.

"You're talking about the restructuring of a government agency where the federal government has said, 'We're just not going to do that in the same way,'" Ted Patestos, co-founder and CEO of Tiger Adjusters, said, noting that change in status quo could challenge the private market.

Others like Melanie Musson, an expert who writes for online marketplace Clearsurance, takes a contrasting view, seeing status quo as something that's challenging the market and reform as something that's necessary, potentially having a favorable impact on the market in the long run.

"They've managed to keep the program going, but they haven't focused on efficiency, improvements, and sustainability. A long-term solution would be a better approach," Musson said in a written statement.

Step for lenders: Stay informed on FEMA proposals and adjust guidance to borrowers accordingly.

4. Manage rate locks carefully

The government has proved generally able to keep mainstream single-family loans going during shutdowns, but in the past the Mortgage Bankers Association has reported that some agencies have been affected by staffing shortages and suspended operations for specialized products.

"If there's a shutdown, things are going to take much longer to happen," said Melissa Cohn, regional vice president at William Raveis Mortgage, in an interview.

Extended loan processing times make interest rate locks important to manage in such a circumstance.

"One thing we need to focus on are rate locks because rates are locked in for a finite amount of time," said Melissa Cohn, regional vice president at William Raveis Mortgage, in an interview.

Rates at the time of this writing had been trending downward, generally making borrowers less concerned about a wait. However, legal and other uncertainties around policy developments like tariffs and the Federal Reserve's independence still could drive rates higher.

"Home sellers are going to have to be more patient, buyers are going to have to be more patient and we're going to have to be very careful about when we lock in and how long we lock in for," Cohn said.

Step for lenders: Review current rate locks and adjust strategies to minimize borrower risk if approvals are delayed.

5. Prepare for verification hurdles

Verification of borrower information can be disrupted during shutdowns, and the Social Security Administration may have limited options if the budget stalls.

SSA's consent-based Social Security number verification service would not be available in a shutdown, said Curt Knuth, president and CEO of NCS, a consumer reporting agency. However, the electronic version of that service would be.

Internal Revenue Service functions around verifications through a staffed unit will likely be protected in a temporary shutdown the way they were amid broader budget cuts but there are some aspects of Trump administration policy that could affect them.

"They're typically immune from any of the impacts because they're deemed mission critical," said Knuth, who is a member of the IRS's Income Verification Express Service working group.

The IVES group is made up of representatives from companies that facilitate processing of 4506-C forms used to request tax transcripts for mortgages.

Questions have arisen about how IVES, a staffed unit that handles a process also available through individual online signups, might be treated in budget discussions under current federal policy.

While IVES is self-supporting due to an industry fee some are willing to pay to minimize hurdles in online signups, President Trump's policy has focused on "modernizing federal technology and software to maximize governmental efficiency and productivity."

"The money is there for IVES. So this is more of an issue of the technology initiative from the Trump administration to manual form-based processes," Knuth said.

Hurdles to the consumer online signup process are generally coming down, he said.

"There are so many ways to go about this differently than having a consumer go through this ID.me process and set up their credentials, and so forth and so on. There are so many different ways such as federated IDs, etc.," said Knuth.

Step for lenders: Have contingency plans for verifying borrower data, including alternative electronic services and awareness of any manual process delays.