How the shutdown will affect Home loans

Hello everyone,

As a Real Estate Broker I was very curious this morning on how the Government shut down may effect all of us and of course concerned. I was also wondering how this may effect my in process buyers and my sellers looking for pre-approved buyers. Below is an update that I received from one of the lenders I work with and wanted to get out to everyone that is in the middle of purchasing a home, starting the loan process or considering purchasing a home.

At this time here is how the shutdown will affect Home loans.

The biggest problem is that every loan needs a 4506T which is verification from the IRS to confirm the buyer’s income tax filings over the last two years. Since the IRS is not working, we will be held up from closing if the 4506T has not yet been processed. For our loans in process this usually gets ordered very early in the process and is then out of the way. If it has not been ordered yet then we can do it late in the transaction but we need the IRS to get back to work before we can receive the results of the 4506T form.

USDA is also a problem because we need their approval before closing these loans and they are not working during the shut down.

HUD / FHA: The FHA should not be significantly impacted, providing the shutdown is brief. HUD has provided the following information that applies to our daily operations:

FHA will be able to endorse single family loans, however, only a limited number of FHA staff will be available, so the process may take longer.

Should FHA run out of commitment authority during a shutdown, then all lenders’ Lender Insurance approval will be temporarily suspended.

VA: Continue originating VA loans; the Department of Veterans Affairs (VA) will continue to operate if there is a government shutdown.

Rural Housing / USDA:

1) On Friday 9/27, USDA Rural Development issued notice that the existing eligible areas will be preserved until further notice. This is good news! When the Continuing Resolution (CR) passes the eligible areas will remain eligible through the expiration of the CR allowing congress and others more time to find a permanent solution.

2) Regarding the CR, now that the government is partially shut down, the USDA employees have been furloughed – Conditional Commitments and Loan Note Guarantees won’t be processed. If it’s a short shutdown then the impact should be minimal, if at all. If it’s an extended shutdown then this will affect turn-times, lock expiration’s, and purchase contracts because Conditional Commitments won’t be issued.

Internal Revenue Service (IRS):

The IRS has indicated that they will not process any forms, including the issuance of tax return transcripts (Form 4506T) during a government shutdown, which will delay loan processing.

We will keep you informed as we learn more about the government shutdown and its implications on the mortgage and Real Estate industry.

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