The extent to which home buyers could feel the pain, depends largely on how long the budget impasse on Capitol Hill goes on.
The potential impact will be minimal as long as the hiatus doesn’t drag on for weeks, but buyers could see delays in getting their loans processed.
Lenders’ request income and Social Security number verifications from the IRS and Social Security Administration, which will cease issuing the records in the event of a shutdown.
Loans can’t close without the income tax transcripts, a requirement put in place after the mortgage crisis in an effort to fight fraud.
If we go two weeks or longer, I think it’s going to have an impact.
The Federal Housing Administration, part of the U.S. Department of Housing and Urban Development, insures home loans for low- and middle-income and first-time home buyers.
HUD said in a contingency plan this week that the agency would continue to endorse new home loans in the event of a hiatus, although with a drastically reduced staff of 68 on-duty employees in the housing office.
Loan officers can use FHA’s computer-automated system to get a case number, the first step in the agency’s process. But with a limited staff, FHA won’t be available to answer questions as the loan moves forward, he said.
Borrowers seeking loans guaranteed by Fannie Mae and Freddie Mac, which together own or guarantee nearly half of all U.S. mortgages, will see business as usual.
The U.S. Department of Veterans Affairs said it would continue to administer its loan guarantee program.
FHA-backed and VA-backed loans accounted for more than a third of new home loan lending last year, according to the Federal Reserve.
The Department of Agriculture’s Rural Development will put on hold on its loan program.
Much depends on where buyers are in the timeline of buying a house and when sales are scheduled to close.
Sellers will have to understand that it’s not a buyer or mortgage company’s fault that this is happening and that they would be accommodating in doing extensions appropriately.
The length of the shutdown would hurt not only buyers and sellers, but real estate agents, escrow and title companies, moving companies and others in the industry.
It could have quite a ripple effect – however, whatever happens should be a non-event or short-lived and we will continue to help buyers and sellers navigate this tenuous time.
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