7 Ways the Gov’ Shutdown Affects Home Loans

Based on this weekend news shows there seems to be no resolution until the debt ceiling is reached (Oct.17th) or extended as the negotiations continue.                           

With that in mind here’s what you can expect for the next couple weeks.        

All mortgages purchased and securitized by Fannie Mae and Freddie Mac will not be affected.        

FHA Halts Reverse Mortgage Insurance During Government Shutdown               .                       While the HUD is maintaining some of its operations during the government shutdown, it has ceased insurance of Home Equity Conversion Mortgages due to a cap on the number of HECMs that can be insured by law.          

Federal Housing Administration (FHA) loans:                  With the shutdown, we may see delays, but not a complete stop to FHA loan closings.         

The office will continue to endorse loans and it doesn’t expect the impact on the housing market to be “significant, as long as the shutdown is brief.”        

Department of Veterans Affairs (VA) loans                  :                  Like the FHA, disruption is possible, but not absolute.        

The VA will continue to guarantee mortgages for Americans who have served in the military, since these loans are funded by user fees.         

It warned, however, in its Sept. 25th contingency plan, that Loan Guaranty certificates of eligibility and certificates of reasonable value may be delayed.        

IRS Tax Transcripts:                  If a loan requires the verification of at least one previous IRS tax return, this process may be delayed.         

While prior years’ tax transcripts can be ordered online, 2012 taxes filed within the last 60 days will not.        

Verifications of Employment, for Government Employees:                   If a federal government employee is seeking a mortgage, and his employment verification is required prior to closing, a lender may be unable to verify this during a shutdown.        

FEMA Homes:                  Homes in flood zones would not be able to close, as flood insurance could not be obtained.        

USDA Loans:                                    During the shutdown, the Department of Agriculture’s doors will be shuttered.         

According to the USDA  , no new housing loans or guarantees will be issued through its Rural Development programs.        

The USDA has also warned that a long shutdown will result in construction setbacks and “a substantial reduction” to available rural housing relative to population.      

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