There is a lot of speculation on what happens to mortgages that are scheduled to close/fund while the government is shut down. While the shutdown continues there may be some impact on timing when a mortgage is involved during a home purchase or a refinance. Here is a very brief overview of specific offices that may have an impact on the ability to close a loan. If you have any questions, please feel free to contact me.
FHA Loans – HUD has a contingency plan that will allow FHA to continue to endorse FHA loans during the shutdown, but delays are expected with shorter staff.
VA Loans – The VA loan guaranty program will be operational. The VA has determined that housing is an “essential service”
USDA/Rural Development Loans – The USDA offices are closed and no new USDA/RD loan approvals will happen until the shutdown is over but some lenders may choose to allow closings at their own risk and will hold the loan until it can be delivered to USDA after the shutdown is over.
Conventional loans through Fannie/Freddie – Fannie and Freddie are not reliant on federal appropriations so they are business as usual, but they are expected to announce relaxed procedures that would permit closings to go forward without federal verification of Social Security numbers and IRS tax transcripts before allowing a loan to close/fund but lenders must verify these items before they can deliver the loans to Fannie/Freddie meaning smaller lenders who do not have the warehouse lines to hold these loans may stop closings during the shutdown while larger lenders may allow closings to continue throughout the shutdown.
IRS (Verification of tax transcripts) – 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, so delays can be expected if the shutdown continues. (See note above for conventional loans.)
Social Security Admin (Verification of social security numbers) – The Social Security Administration is closed and has suspended most customer service functions including their CBSV (Consent Based SSN Verification Service). Social Security verification is required by lenders when there are issues with the social security number identified on data verification reports. (See note above for conventional loans.)
Flood Insurance – the offices that issue flood insurance are closed for the shutdown. No new policies will be issued until business is resumed. Existing policies, however, may be assumed, so if buying a house in a flood zone and the current owner has a flood insurance policy, the buyer can assume the current flood policy and continue with closing.
The views expressed are my own and do not necessarily reflect the views of my employer.
Visit my website at: www.juliecnichols.com or contact me with any of your home loan questions.
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