How much this government shut down impacts mortgage loans depends on several factors, including what stage your mortgage is in processing, what type of mortgage it is and who the investor is. It’s possible that it may not impact your transaction at all. The more time our government is shut down, it may become more difficult or require more time to process a mortgage loan. The shutdown in 1995 lasted for a very long 21 days – let’s hope our representatives can get this resolved soon!
Which government mortgage programs are impacted? USDA has ceased all but essential functions. Please check with your loan officer immediately if you have a USDA loan to get an update. HUD/FHA and VA will continue to operate on a limited staff.
If you are considering buying a home using a USDA loan, you may want to consider “plan b” which could be an FHA loan possible paired with down payment assistance like Home Advantage (available in rural and non-rural areas).
Why does the government shutdown impact mortgage loans? Lenders and banks have underwriting overlays that require IRS tax transcripts (in addition to your W2s or tax returns) to be provided. With the shutdown, obtaining transcripts from the IRS is difficult (if even possible). Banks and lenders also have underwriting overlays that require verification of a borrowers social security number. Some lenders and banks are accepting loans with the signed Form 4506 and documentation proving ownership of the borrowers social security numbers. Some banks and lenders are not.
Tax transcripts and social security verifications are typically not ordered until there is a “bona fide” transaction. Sometimes with a full preapproval or when a loan commitment letter is being offered for a self-employed borrower, it’s possible that the IRS tax transcript may have been obtained.
If your loan is currently in process, check with your mortgage originator to make sure that they have your tax transcripts and social security number verification (if needed). If they do not have these items, find out what your options are with closing your transaction. It’s possible the closing may need to be delayed or that you may need to come up with a “plan b”.
As a correspondent lender, we work with several investors and banks. Currently we are reviewing transactions on a case by case basis if we are near closing and do not yet have the tax transcripts. Self-employed borrowers may find it more difficult to close a mortgage without a tax transcript during the shutdown.
The government shutdown in 1995 lasted for a very long 21 days – let’s hope our representatives can get this resolved soon!
If I can help you with your mortgage on your home located anywhere in Washington state, please contact me!
Is it too late to book a one week cruise to Alaska? I might have a lot of free time on my hands. 😉
Let’s hope not! We are still moving forward with loans at Mortgage Master Service Corporation. 🙂
Hi Rhonda, all my USDA loans are on hiatus just as referenced in the blog. I find it critical to the economy moving forward into a full recovery to have a working government and with the markets retracting on day 3 of the shutdown
do you think housing rates will drop or rise the longer the shutdown goes?
Hi Toby, I think we may see rates trend lower or stay close to where they’re at during the shutdown and that rates will pop up once the shutdown is over – let’s hope that’s soon!!
I doubt the shutdown will end today and there will be a long weekend of watching the news because it will take 20-30% of (R) votes to open the government according to NY (D) on CNN this morning.
I agree, Toby. And we have the debt ceiling looming ahead too.
I wish the blog that linked to my post (see trackback from NOLO) allowed comments… because the article is not completely accurate. Some lenders are proceeding without the tax transcripts (we are!). Lenders will require a signed 4506 and borrowers should expect the 4506 to be submitted for a tax transcript once the shutdown is over. This may be on a case by case basis – self employed borrowers may find it more challenging to close during the shutdown if a tax transcript has not yet been obtained.
I don’t know if my lenders are proceeding with out tax info.
We are on a case by case basis. It will be more challenging for self-employed borrowers or those where tax returns play a significant role in their income.