Hat tip to Wendy for sending this in!
A shutdown of the federal government could throw a monkey wrench into many corners of our economy. And if you’re getting ready to close on a house, look out, because one of those wrenches might be headed your way.
That’s because some government agencies are involved in the mortgage process, and they’re generally of the “non-essential” variety. The good news is, most home buyers (probably) won’t be affected. Mortgage giants Fannie Mae and Freddie Mac aren’t pure government organizations, and they’ll keep right on going approving loans during any potential shutdown.
However, buyers using FHA or VA loans may run into trouble, since those agencies would likely be staffed at minimum levels during a shutdown, with all the power of a DVD player on standby mode (though VA hospitals would remain fully staffed).
In December — when we last flirted with a shutdown, because this ridiculous ritual has become a regular exercise — Zillow estimated that 3,500 home loans per day could be delayed if VA and FHA employees were furloughed and couldn’t process incoming mortgages.
That’s not the end of it, though. If you’ve applied for a mortgage, you know it involves submitting a staggering amount of paperwork and documentation — including your tax returns. Responsible lenders generally verify that information with the IRS, and guess who won’t be answering emails or picking up the phone during a government shutdown.
“They’re barred from the building and barred from using the network for access. So, you have a real shutdown,” Mortgage Bankers Association CEO David Stevens told CNBC in April — during yet another recent installment of this nonsense.
Another hiccup could occur if a lender needs to verify your Social Security number, which could happen if your application has a typo or some other information that doesn’t match up with the data on file.
The last time we had a bona fide government shutdown, in October 2013, as many as 17% of closings were delayed, according to the National Association of Realtors.
That’s no picnic — juggling a home purchase with an expiring lease or an existing home you’re trying to sell is stressful enough without one part of the equation falling through. But even worse, a few deals actually fell apart altogether.Link to Article
Prediction: I don’t think dems will be able to take the heat for stopping the government, to protect an estimated 3 million daca dudes. The action is without precedent. We’ve never stopped our government with the primary intent of protecting foreign interests in this way. 3 million is the size of 6 cities. The middle-class is getting squeezed for rental housing in sanctuary states, and we’ve seen the brazil-like shanty towns in Orange County, of all places. The blowback will be pronounced. That’s what happens when you mistake a battle for a war. You overextend resources by not retreating, and by the time you figure out it’s just a battle, you’re out of men and bullets for the war. I think we’ll be back in business very soon.
As noted here by the National Association of Realtors, there will be an impact on housing via the shutdown of the Internal Revenue Service.
The IRS is closed and has suspended the processing of all forms, including requests for tax return transcripts (Form 4506-T). 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 4506-T requesting IRS tax transcripts. On loans requiring a Form 4506-T Fannie Mae and Freddie Mac are expected to adopt relaxed provisions allowing closings but subject to tax transcript verification before the GSE’s purchase the loans.