Government Shutdown - Impacting Mortgages

With the prolonged government shutdown, and it appearing as though it won't be resolved for the next few days, here are some helpful tips as we work through the shutdown.

·         FHA and VA are the most commonly affected programs as they are funded by the government.  However, there is no change to the ability to complete VA or FHA loans due to the government shut down.  Both departments will continue to operate and since most of what is needed is automatic, there should be little noticed as a result of the shutdown. 

o   Word of Caution – if the file has a “hair” on it or is difficult and an UW needs to speak to a live FHA person or get a specific answer from FHA – this is where it could take a bit longer.  Normally they return calls and answer questions in 24-48 hours, with the shutdown and running a “skeleton” crew for FHA, then plan for longer time.

o   I would give the deals an extra week or so to close if the government shutdown continues.

·         4506T – Tax Transcripts and SSA Form

o   The 4506T is an internal item completed for all loans but the lenders rely on the IRS to get these back.  Again, with the shutdown, we have waived the need to have the transcripts for loans with note dates after 09/26 until the government shutdown has ended. The SSA Form also impacts loans.  Most often there are no issues when a lender pulls the SSN from a borrower.  In the event that there is a discrepancy or verification is needed on the borrower from the Social Security Administration, due to the shutdown, this loan scenario would not be able to close.  This has to do with the fact that the lender doesn't want to complete a loan to the wrong person and the SSA form helps verify the identity of the borrowers on the transaction.

 

·         Rural Development

o   Due to a lapse in appropriations for Rural Development as of October 1, Rural Development has initiated the process of orderly shutdown of nonessential operations.  You can view USDA’s plans for a lapse in appropriations at http://www.whitehouse.gov/omb/contingency-plans.

·         Market Changes

o   The longer the shutdown continues the greater impact will be felt in the market.  As we approach the debt ceiling deadline of 10/17/2013, the markets continue to be influenced by this prolonged stalemate.  Ultimately a decision will be made and when it does, that decision will have an influencing factor on the mortgage market.