Government Shutdown Delays Home Closings
What is a government shutdown? Why does the government shut down? What happens when the government shuts down? How does the government shutdown affect mortgage loan closings? The last time there was a government shutdown was on December 21st, 2018. This has sent turmoil into our Global markets. Mike Gracz of Gustan Cho Associates believes the economic and monetary system in the United States is unstable. The Federal Reserve Board can print money anytime they see fit. Any precious metals do not back the United States dollar and are a printing press.
Many investors are hesitant to jump into the stock market. We’ve seen the ups and downs lately in the Dow Jones Industrial Average and other securities markets. All that being said, this Government shutdown may affect mortgage borrowers in the United States.
The housing market has been slowly recovering since the crash of 2008, but the Government shutdown is not helping! This guide will outline a few items affected in the mortgage business due to the shutdown. This article will discuss Government shutdown delays in the home closing process.
Government Shutdown Delays Home Closings On USDA Loans
The most impacted Loan program the Government shutdown has affected are USDA loans. The US Department of Agriculture will not issue USDA direct loans guaranteed loans during the shutdown. USDA loans have two sets of underwriting processes. The lender first underwrites the USDA loan, and the final underwriting has to be done by the USDA, says Mike Gracz of Gustan Cho Associates:
The U.S. economy is in trouble. The dollar is not backed by gold or silver. Whenever the Fed wants money, all they do is print them. This is why inflation is soaring, and rates are at historic highs.
Many lenders have to cancel closings for USDA direct loans. Many families must cancel their mortgage applications and wait to see what happens with the shutdown. USDA loans are outstanding loans for borrowers and usually do not require a down payment.
Types Of Loan Programs Affected By Government Shutdown
Every QM MORTGAGE (Qualified Mortgage) is affected by the Government shutdown regarding IRS transcript verification and Social Security reporting. During the last government shutdown, mortgage lenders delayed getting 4506-T from the Internal Revenue Service.
During the mortgage process, a borrower will sign a 4506-T form that allows the lender to verify their income with the IRS. During the shutdown, the IRS will not process the new request for transcripts. Depending on lender requirements, this can stall or stop your mortgage process.
Technically lenders are not required to have transcripts at closing. Transcripts can be added after the closing. But the majority of lenders require this before closing. During a mortgage application, the lender must verify your social security number with the Social Security Administration. The Government shutdown has created significant delays in this process. Fewer employees are working during the shutdown, creating a backup.
Government Shutdown Delays Home Closings On FHA Loans
The Government shutdown has also delayed FHA closings. Mortgage lenders need to get verification of employment as well as 4506-T to clear mortgage borrowers for a clear to close, says Angie Torres of Gustan Cho Associates:
Verification of employment is a key component and must be verbally verified within ten days of your loan closing. The legislation was passed on December 21st, 2018, to extend the national flood insurance program through May 31st, 2019.
The Federal Housing Administration has fewer staff members working during the shutdown. This is also creating a bottleneck in the mortgage process. Luckily the US Department of Veteran Affairs will not be impacted by the Government shutdown, meaning VA loans should not see any slowdown.
How Government Shutdown Delays Home Closings On Conforming Loans
For the most part, Freddie Mac and Fannie Mae will still operate fully and not be affected by the shutdown. While these are Government agencies, they are privately funded. According to Wendy Lahn, a government shutdown affects federal employees because mortgage companies cannot get employment verification.
If you are a federal employee, your lender may not be able to get a verification of employment before loan delivery, delaying your closing.
FEMA, or The Federal Emergency Management Agency, is open during the shutdown and is issuing and approving new policies. While we all hope the Government shutdown ends soon, there are a few things to look out for during the mortgage process. Please get in touch with Gustan Cho Associates for more information, or check back for updates on the shutdown!
This BLOG On Government Shutdown Delays Home Closings Was Published on May 4th, 2023, by Michael Gracz of Gustan Cho Associates.