This BLOG On Government Shutdown Delays Home Closings Was PUBLISHED On January 4th, 2019
The Government shutdown that started on December 21st 2018 is still going on today.
- This has sent turmoil into our Global markets
- Many investors are hesitant to jump into the stock market
- We’ve seen the ups and downs lately in the Dow
- All that being said, this Government shutdown may affect mortgage borrowers in the United States
- The housing market is slowly recovering since the crash of 2008 but Government shutdown is not helping!
- Below we will outline a few items that are affected in the mortgage business due to the shutdown
Government Shutdown Delays Home Closings On USDA Loans
The most impacted Loan program the Government shutdown has affected are USDA loans.
- The US Department of Agriculture will not issue USDA Direct Loans are guaranteed loan during the shutdown
- Many lenders are having to cancel closings for USDA Direct Loans
- Many families are having to cancel their mortgage applications and wait to see what happens with the shutdown
- USDA loans are fantastic loans for borrowers and most of the time do not require a down payment
Types Of Loan Programs Affected By Government Shutdown
Every QM MORTGAGE (Qualified Mortgage) is affected by the Government shutdown in terms of IRS transcript verification and Social Security reporting.
- During the mortgage process, a borrower will sign a 4506-T form that allows the lender to verify your income with the IRS
- During the shutdown, the IRS will not process new request for transcripts
- Depending on lender requirements this can stall or stop your mortgage process
- Technically lenders are not required to have transcripts at closing
- Transcripts can be added after the closing
- But majority of lenders require this before closing
- During a mortgage application the lender must verify your social security number with the Social Security Administration
- The Government shutdown has created significant delays in this process
- There are fewer employees working during the shutdown creating a backup in the process
Government Shutdown Delays Home Closings On FHA Loans
The Government shutdown has also delayed FHA closings.
- The Federal Housing Administration has fewer staff members working during the shutdown
- This is also creating a bottleneck in the mortgage process
- Luckily the US Department of Veteran Affairs will not be impacted by the Government shutdown, meaning VA loans should not see any slowdown
How Government Shutdown Delays Home Closings On Conforming Loans
For the most part Freddie Mac and Fannie Mae will still be operating at full force and not affected by shutdown.
- While these are Government agencies, they are privately funded
- If you are a federal employee, your lender may not be able to get a verification of employment prior to loan delivery, delaying your closing
- Verification of employment is a key component and must be verbally verified within 10 days of your loan closing
Legislation was passed on December 21st 2018 to extend the national flood insurance program through May 31st 2019. FEMA or The Federal Emergency Management Agency is open during the shutdown and is issuing and approving new policies.
While we all hope the Government shutdown ends soon, there are a few things to lookout for during the mortgage process. Please reach out to Gustan Cho Associates for more information or check back for updates on the shutdown!
This BLOG On Government Shutdown Delays Home Closings Was Published On January 4th, 2019 by Michael Gracz of Gustan Cho Associates at Loan Cabin Inc. NMLS 1657322