The second week of the government shutdown is giving many homebuyers and lenders second thoughts about the housing market. After a robust spring and summer, concerns about the shutdown and the potential debt crisis are keeping some potential buyers on the sidelines. Some of the uncertainty is based on actual facts, much is pure speculation. For the most part, mortgage markets are running during the government shutdown, and homebuyers may even get a bonus, if mortgage rates keep falling. Most large lenders are following guidance from Fannie Mae and Freddie Mac, which does not require IRS verification unless the borrower is financing multiple properties. The lender can close the deal without the verification but can’t deliver it to Fannie or Freddie without the IRS documents. Jumbo loans (mortgages with values exceeding $417,000) are more problematic. Some lenders will not do them at all without tax verification from the IRS. Others are delaying the process. They will all have to verify the tax information once the government opens again Loans backed by government insurance from the Federal Housing Administration (FHA) and loans through the Department of Veterans Affairs (VA) are largely not affected, since their processes are mostly automated or lenders have delegated authority to close the loans, but expect delays since mortgage servicers have to order a FHA case number, prior to an appraisal on the home. Expect that process to take longer. Hardest hit by far is the Department of Agriculture home loan program. USDA loans, which are 30-year fixed with no down payment, make up less than 5 percent of the total mortgage landscape but are a favorite among first-time buyers and builders. USDA is currently closed and not processing any loans. This Week’s Real Estate Insight: If you are somewhere in the mortgage process right now and you are concerned that the shutdown might affect your loan, some proactive steps should be taken. Borrowers should stay in touch with their lenders to make sure things are moving along. If the loan is going to be delayed, it will affect other people besides the borrower.How the Government Shutdown Affects the Mortgage Process
- By Michael McCann
- Posted
The second week of the government shutdown is giving many homebuyers and lenders second thoughts about the housing market. After a robust spring and summer, concerns about the shutdown and the potential debt crisis are keeping some potential buyers on the sidelines. Some of the uncertainty is based on actual facts, much is pure speculation. For the most part, mortgage markets are running during the government shutdown, and homebuyers may even get a bonus, if mortgage rates keep falling. Most large lenders are following guidance from Fannie Mae and Freddie Mac, which does not require IRS verification unless the borrower is financing multiple properties. The lender can close the deal without the verification but can’t deliver it to Fannie or Freddie without the IRS documents. Jumbo loans (mortgages with values exceeding $417,000) are more problematic. Some lenders will not do them at all without tax verification from the IRS. Others are delaying the process. They will all have to verify the tax information once the government opens again Loans backed by government insurance from the Federal Housing Administration (FHA) and loans through the Department of Veterans Affairs (VA) are largely not affected, since their processes are mostly automated or lenders have delegated authority to close the loans, but expect delays since mortgage servicers have to order a FHA case number, prior to an appraisal on the home. Expect that process to take longer. Hardest hit by far is the Department of Agriculture home loan program. USDA loans, which are 30-year fixed with no down payment, make up less than 5 percent of the total mortgage landscape but are a favorite among first-time buyers and builders. USDA is currently closed and not processing any loans. This Week’s Real Estate Insight: If you are somewhere in the mortgage process right now and you are concerned that the shutdown might affect your loan, some proactive steps should be taken. Borrowers should stay in touch with their lenders to make sure things are moving along. If the loan is going to be delayed, it will affect other people besides the borrower.
