Well by now you have heard of the government shutdown and you have probably read lots of different stories already about how you will be impacted. One of the biggest concerns regarding the shutdown and how it will affect housing has revolved around the mortgage market, specifically prospective buyers’ access to new home loans. After all, more than 90% of all loan activity is underwritten, insured, or owned by the government and its affiliated entities.
Initially at least, the mortgage market is likely to be only minimally impacted. New loans will continue to push through most government agency pipelines. What will change is how long the process takes, as many agencies expect to experience delays.
Mortgages purchased and securitized by Fannie Mae and Freddie Mac won’t be affected because their operations are paid for by fees charged to lenders.
The Department of Veterans Affairs will continue to guarantee mortgages for Americans that have served in the military since these loans are funded by user fees as well. Loan Guaranty certificates of eligibility and certificates of reasonable value could be delayed.
One concern I have heard already is whether or not this will have a major impact on FHA loans since many media outlets have reported that the FHA would be unable to endorse any single-family loans and that no staff would be available underwrite and approve new loans. The FHA’s Office of Single Family Housing will indeed remain open for business, albeit with a smaller staff. FHA will be able to endorse single family loans during the shutdown. A limited number of FHA staff will be available to underwrite and approve new loans.
One government lender that will indeed suspend its home loan activity, however, is the Department of Agriculture. The USDA says that no new housing loans or guarantees will be issued through its Rural Development programs in a shutdown. The department also warns that such a scenario could cause “a setback in construction start-up,” and if the shutdown lasts for an extended period, “a substantial reduction in housing available in rural areas relative to population.”
One of the most notable delays that will affect mortgage applications is the delay of Tax Transcripts (4506-T Requests). All loans require tax transcripts and this could be delayed due to the shutdown. How long the delay will be is still unknown. If you have already started the loan process and passed this step you hopefully won’t see any other delays.
As more information comes available, I will update my blog! If you have any specific loan questions, please let me know and I can refer you to a fantastic lender to help you out!
Kennedy Dream Homes
Keller Williams Realty East Valley