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Governement Shutdown| What it Means On Mortgages

One of the biggest questions regarding the shutdown is how will it affect housing?
As a Realtor, it does NOT directly affect me, but indirectyl? YES. Since most of our buyers need loans, and the Federal government is active in the lending market, that is where our concerns lie. 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.

Realtors, home buyers, home sellers, mortgage folks-we all want to know, what is the affect on us?
This is what we know, or think we know, on Day One. There are a few immediate concerns and the 4506 suspension is at the top of my list because it may affect every loan in process:

• The IRS has suspended all 4506T processing. This is the verification process of past income. With no guidance from investors or the agencies on this topic we are basically in a holding pattern and following current procedures that state we cannot close a loan with verification of the W2 or tax returns used in the file.

• USDA commitments will cease this morning and any USDA loan in the system without a commitment issued will not be able to close.

• FHA/VA will continue to insure and guarantee loan files, however any manual request (example: requesting a case number be cancelled to allow a new case to be processed) will not be processed. Currently both the VA Portal and FHA Connection are up and running so we can order case numbers, however if either system goes down it may take an extended period to get back on line.

• For existing and new customers who are government employees, verification of employment may be delayed or impossible to obtain during the shutdown. Those government employees who are furloughed will not be able to close on a mortgage until the government is up and running again.

The 4506 Suspension is the key, one lender says it will process loans without this verification, another lender says no. Stay tuned.