How the Government Shutdown impacts the Real Estate and Mortgage Business
FHA, VA and USDA Loans impacted by Government Shutdown..
A Government shutdown? I have never come to experience on since the last one was in 1995 and at that time I was living in Germany. So what does a Government Shutdown mean for you when trying to buying or refinancing a home?
Not going into every detail, I am going to lay out the effects of a the government shutdown from the real estate and mortgage industry perspective.
In 2013 approximately all mortgages funded in 2013 were Government loans, therefore there are pretty good odds that we will have to deal with some delays to get a FHA, VA or USDA loan funded.
Since those loan programs account for a big portion of home loans originated every month, halting or delaying these loan programs could cause a slowdown in home sales, and send ripples through the housing recovery.
How about all the people employed in the housing sector? Roughly 9300 people are employed by HUD. What about the Banks? What about Appraisers, Home Inspectors, Underwriters and Loan Originators… I am sure you get the idea…
So what does this mean right now for the mortgage business???
- Lenders will be able to obtain a FHA case number from the FHA Connection
- Limited FHA staff to respond to questions
- CAIVRS will be available to determine if a borrower has a delinquent federal debt
- FHA Total Scorecard will be availableFHA will collect the Upfront MIP during a shutdown
Can we close loans with a MCR? Answer = Yes. However, if the shutdown continues we will likely not allow loans with a MCR to close. This is because HUD approves all MCRs after we close the loan and HUD has indicated they will not have the staff to complete these reviews.
- The Department of Veterans Affairs (VA) will continue to operate if there is a government shutdown, which means lenders will be able to continue originating VA-guaranteed loans. Both lenders and borrowers will be able to obtain the Certificate of Eligibility online, and they will still be able to submit applications and follow up on COEs that require more research with the Atlanta Eligibility Center.
Will VA loans be adversely affected in any way? Answer = no
- Indications are that Rural Development will cease all but essential functions and no new loans or guarantees will be made.
Will we be able to obtain a conditional commitment? Answer = No
Can we close a loan without the conditional commitment? Answer = No
Can we close a loan if we have the conditional commitment? Answer = Yes
Internal Revenue Service (IRS)
- The IRS will NOT process any forms, including tax transcripts (Form 4506T).
Can we close loans without the tax transcripts? Answer = No
Social Security Administration (SSA)
- The SSA will likely NOT be able to verify social security numbers.
Can we close loans without verifying the social security number? Answer = No
Fannie and Freddie
- Fannie and Freddie would not be directly affected, except to the extent they rely on verification and other functions of HUD, IRS, and SSA.
- The Federal Reserve – including the reserve banks – is not funded through the annual appropriations process; thus a government shutdown would have no impact on Federal Reserve operations, including payment system and open market functions.
Consumer Financial Protection Bureau (CFPB)
- The CFPB is not funded through the annual appropriations process; thus a government shutdown should have no impact on CFPB operations.
FEMA Flood Insurance
- It is likely that mapping issues or amendments will be impacted.
- Most functions will be unaffected because of their use of contractors and public/private partnerships.
Will I be able to get flood insurance? Answer = yes
If the subject property is not yet mapped by FEMA and needs research by FEMA will my loan be affected? Answer = yes
Can I close the loan if mapping research cannot be completed by FEMA? Answer = no
Programs NOT Impacted By A Government Shutdown
- Energy/power grid
- Disaster relief
- Social Security
- Air traffic control
- Border Patrol
- National Security
- Banking System (bonds will still be sold)
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Hopefully this Government Shutdown will be over soon.