The South Coast Real Estate Round-Up

Government Shutdown affects on Mortgage Financing

October 1st, 2013 9:32 AM by Christopher Terry

So, government shutdown is upon us. If you're in the middle of financing a home will it affect you? And if so, how?

HUD, FHA, and MBA have had a number of releases regarding the effects of a shutdown so we'll ignore the reasons for this shutdown for a moment, summarize these announcements, and focus solely on the affects a relatively BRIEF shutdown could have on Mortgage Participant.

FHA:
  • FHA will be able to endorse single family loans during the shutdown, however, only a limited number of FHA staff will be available to underwrite and approve new loans so the process may take longer.
  • If a lender submits loans for approval if the lender is in pre-closing, FHA staff will not be available to underwrite and approve loans.

GNMA, FNMA, FHLMC:  No significant affect

VA:

The Department of Veterans Affairs (VA) will continue to operate if there is a government shutdown which means
lenders will be able to continue originating VA-guaranteed loans. Both lenders and borrowers will be able to obtain their Certificate of Eligibility online, and they will still be able to submit applications and follow up on COEs that require more research with the Atlanta Eligibility Center. Lenders can and should continue to remit funding fees through the Funding Fee Payment System.

USDA
  • USDA has not issued guidelines yet, but indications are that they may be similar to those in the 2011 contingency plans issued by OMB. Under this plan Rural Development would cease all but essential functions and no new loans or guarantees will be made.
FEMA
  • FEMA is likely to provide information through a bulletin in the case of a government shutdown. While many functions will be unaffected, because of their use of contractors and public/private partnerships, and it is likely that mapping issues or amendments will be impacted
Should this shutdown last anything more than a couple of weeks then all bets are off…on everything. Economic growth, the ability to originate a loan, interest rates, equity prices, etc.

A short term shutdown should have limited effects so don’t worry just yet.
There is a distinct possibility that this will be cleared before much time goes by so for now talk to your mortgage lender to see if you're loan will be affected. 

Special thanks to 
Ray Severance of Residential Mortgage Services (NMLS #15875) for sharing details of the possible affects of a shutdown with us. Ray is a branch manager for RMS and can be reached at RSeverance@RMSMortgage.com.
Posted in:General
Posted by Christopher Terry on October 1st, 2013 9:32 AM


In addition the IRS is closed and has suspended the process of processing all forms including the 4506T. These transcripts are required for many kinds of loans, including FHA and VA, so delays can be expected if the shutdown is protracted. As the SS administration is closing so verifing SS number will also be suspended further complicating mortgages.
Posted by Chris Terry on October 2nd, 2013 11:46 AM
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