As the government shutdown continues, anyone currently involved in the sale or purchase of real estate where a mortgage is involved may have some questions on the impact to the transaction.
While each transaction and mortgage may have its own unique circumstances, here is a brief overview of what to expect.
- USDA/Rural Housing Mortgages — The U.S. Department of Agriculture is not in operation at this time. New Direct Loans or Guaranteed Loans will not be issued. USDA must issue a conditional commitment for all loans; and until the government resumes operation, anyone using this program will be unable to close a loan.
- Flood Insurance through FEMA should not be impacted. Legislation passed in December, 2018 extended the National Flood Insurance Program through May 31, 2019.
- Every mortgage transaction requires IRS tax transcripts, and they are processed directly by the IRS. The IRS has advised that while they remain closed during the shutdown, however, they have reinstated the ability to process transcript requests as of January 7th. Turn times for lenders to receive the information from the requests could be delayed due to the backlog. Many lenders will still close loans without transcripts during the shutdown period, but each borrower and their individual circumstances will be reviewed to ensure there is no risk to the lender by closing the loan without the transcripts if they are unable to be obtained.
- Social Security Number verification is part of every mortgage transaction. Lenders are able to verify this information through the Social Security Administration (SSA) during the shutdown, so there is no impact.
- VA Loans will proceed as normal as the Department of Veteran Affairs is not impacted by the shutdown.
- FHA is operating with a minimal staff, and direct endorsement lenders are able to approve and close most FHA loans. If the lender you are working with is not a direct endorsement lender, there may be delays and/or the inability to close the loan. If any assistance is needed from the staff of FHA, there may be some delays in processing.
- The impact to Federal Government Employees may be affected due to the inability to complete the verification of employment for furloughed employees. Most all agency and investor requirements include a verification of employment, so lenders may not be able to close loans until furloughed employees return to work and employment can be verified.
Overall, the partial government shutdown has had minimal impact on mortgage transactions. The greatest impact is to borrowers using USDA for their financing and to the direct furloughed employees of the federal government. The most important step that can be taken at this point is to set proper expectations for all parties in the transaction when it is known that any of these components exist.
Otherwise it’s business as usual. For now . . .
Dan Ranck, HomeSale Mortgage, LLC
Mortgage Loan Originator
Direct: (717) 271-2400 / efax: (866) 849-4320
firstname.lastname@example.org / www.danranck.com
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