The Government Shutdown & The Impact on Housing
USDA Loans – Basically, the USDA loan program is on hold. Because all files are approved by USDA offices directly, there will be no guarantees or housing loans issued by the USDA offices until the shutdown is resolved. If you have a “Conditional Commitment” and all conditions are satisfied, you should be able to close the loan. Otherwise, expect an impact on postponed closings in rural areas.
VA Loans - VA loans are fee based loans and should be processed without delay. The issuance of VA Certificates may be a hindrance. However, new applications will be processed and files will be underwritten and funded.
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. Limited FHA staff will be available to respond to questions, emails or other correspondence. Lenders will be able to obtain an FHA case number. It is my understanding that FHA will not approve Condo projects. HUD is working with a reduced staff. You should expect an impediment in HUD communication and processing documentation. However, HUD loans will be insured & staff will continue to delegate and underwrite.
Conventional Loans – Conventional lenders are accepting applications and are being approved & funded. However, the verification of social security and IRS 4506-T transcripts services are unavailable. IRS will not process any forms including 4506T requests nor will the SSA process any SSA-89 requests. These services will be resumed once the Government is back to work.
The IRS is closed and has suspended the processing of all forms, including requests for tax return transcripts (Form 4506T). While FHA and VA do not require these transcripts, they are required by many lenders for many kinds of loans, including FHA and VA, so delays can be expected if the shutdown is protracted. We have received indications that many loan originators are adopting revised policies during the shutdown, such as allowing for processing and closings with income verification to follow, as long as the borrower has signed a Form 4506T requesting IRS tax transcripts. On loans requiring a Form 4506T, Fannie Mae and Freddie Mac have also adopted relaxed provisions allowing closings but subject to tax transcript verification before the GSE’s purchase the loans.
The Social Security Administration is closed and has suspended most customer service functions. According to the SSA Contingency Plan, verifying Social Security numbers through the Consent Based SSN Verification Service will also be suspended during the shutdown, a further complication for mortgage processing. As with IRS income verification, policies vary among lenders, with many choosing to exercise forbearance during the shutdown period subject to subsequent verification. Fannie Mae and Freddie Mac have also adopted policies to allow for closing subject to subsequent verification and before GSE purchase of the loan.
Sellers should note that potential delays may occur and are no fault of Buyers. All Parties should be prepared for potential delays but being adequately informed is the key to a smooth closing. Should you have any questions or require additional explanation, please feel free to contact me at your convenience.