What to expect from the Government Shutdown related to Real Estate

Ta government shutdown may mean home loan delays for home buyers.

Government Shutdown Causing Delays in Home Loan Approvals

Even though the federal government is not directly involved with your home loan process, there are indirect factors that the Federal government has to help with to get a mortgage loan closed.  Government agencies may be suffering from furloughed employees and that will backup processing loans. This can delay all loan types from government backed FHA Loans, USDA Loans, VA Loans, and even Conventional Loans.

Why will Home Loans be delayed during the Government Shutdown?

Basically the delays will come from third party verifications of income, identities or flood zones.

One verification is of buyers income through a 4506-T IRS tax transcript.  The IRS will be furloughing non-essential personnel which including those who process these tax transcripts. If your income cannot be verified through the IRS, your loan will not close on time.

Another verification is your  Social Security Number, the Social Security Administration’s will not be providing those during the shutdown.

Flood insurance coverage verified through FEMA the government agency that sets the flood zones maps will become a problem.

List of Government Agencies Affected By the Government Shutdown:

  • Housing and Urban Development (HUD)
  • Federal Housing Administration (FHA which insures FHA Loans)
  • Fannie Mae (FNMA a conventional mortgage buyer)
  • Freddie Mac (FHLMC a conventional mortgage buyer)
  • Veteran’s Administration (VA for VA Loans)
  • Internal Revenue Service (IRS which verifies income on tax returns)
  • United States Department of Agriculture (USDA for Rural Development Loans)
  • Social Security Administration (SSA which verifies Social Security Numbers)
  • Federal Emergency Management Agency (FEMA which helps with flood insurance)
  • Department of Education (DOE verifies minimum student loan payments)

 

Will FHA Loans be delayed?

FHA Loans,  popular with First Time Homebuyers, should not be significantly impacted as long as the government shutdown is short. HUD has issued a memo to banks and lenders explaining that daily operations will be continued. The FHA will continue to endorse single family loans,  but the process may take longer.  Delays may be expected due to third party verifications.

Will VA Loans be delayed?

The Department of Veterans Affairs (VA) has stated that business should continue as usual for VA Loans but 1/3 of the VA Benefits Employees will be furloughed slowing things down, as well as delays on third party verification’s.

Will USDA Rural Development Loans be delayed?

USDA Rural Development Loans will probably be delayed during the Shutdown. There are no updates from the USDA at present.

Will Conventional Loans be delayed?

Conventional Mortgage loans should not be directly delayed through the shutdown except third party verification’s may cause minor delays.

Will Home buyers be affected during the Federal Government Shutdown?

If the  shutdown lasts more than three days, we  may see delays in mortgage loan funding for all home loan types. Plan for delays . Home buyers and sellers should be vigilant in seeking updates from their loan officers and real estate agents as well as work closely with them to ensure a quick and smooth real estate closing.

No comments yet.

Leave a Reply

You must be logged in to post a comment.