With: John Meussner, Loan Officer & Mortgage Coach @ Mason-McDuffie Mortgage
So it’s been a day and the government is still shut down. What exactly does that mean? I’ll spare the humor and all the things I’d like to say – basically it means that some services are available, and others aren’t.
While many vital services are still in action and exempt from shutdown, many others have been frozen, and could inadvertently have a pretty poor effect on the housing market, especially if this shutdown lasts for more than a couple days.
Please note: Not all lenders will have the same processes during a shutdown, just like in 2013. Your experience may vary. For example we are good to proceed on USDA Loans as-is during the shutdown.
USDA loans – the USDA loan program is frozen. Since files are approved by USDA offices directly, there will be no more guarantees or housing loans issued by the USDA offices until the shutdown is over. This could have a pretty terrible effect for those who live in rural areas or need 100% financing.
VA loans – VA loans should be in full swing, as the program is run based mostly on fees. Where there might be an issue is when someone needs a VA certificate. When the government shut down in the 90’s, there was a delay in obtaining certificates, and this will likely be the case again. New applications will be taken, and files will be underwritten and funded, though.
FHA loans – FHA loans aren’t expected to feel a real impact from the government shutdown so long as the shutdown doesn’t last for a long period of time. HUD is running at a significantly reduced staff, though, so getting information and paperwork to & from HUD could take a lot longer than usual. The good news is, loans will still be insured & they will still have staff delegated to underwriting.
Conventional loans – while many are stating the shutdown is ‘no big deal’ for conventional financing, this is simply not the case. Yes, conventional loans will be applied for, underwritten, approved, and funded. BUT, over the past few years, as we all know, lenders have taken extra steps to fight fraud, and 2 of these steps are social security verifications and IRS 4506-t transcripts. These services will be unavailable, and therefore loan files may be put on hold until the shutdown is over.
Some borrowers will be in more trouble than others – for self-employed borrowers, they may be at the mercy of the shutdown as a work around for 4506 transcripts isn’t currently available. Also, for any government employees that are in the midst of the loan process it will be extremely difficult to get any verifications of employment done.
I’d strongly recommend being proactive in making sure none of your clients are surprised by any potential delays – sellers should understand that the shutdown can cause delays at no fault of buyers. Anyone buying or refinancing should be aware of what type of loan they are getting, and if the potential is there for delays, they should plan accordingly.
Hopefully in a day or 2 this blog post won’t matter & things will be running smoothly once again between our elected officials, but as a preemptive stragegy, it would be a good idea to know this information. And for an added benefit you’ll already know what to be ready for if this happens in the future.
– John Meussner