Government Shutdown Affecting Housing Market And Home Buyers
This BLOG On Government Shutdown Affecting Housing Market And Home Buyers Was PUBLISHED On January 23rd, 2019
The 2019 Partial Government Shutdown has been the longest shutdown in U.S. history.
- We are currently entering week 5 of the partial shutdown
- It is affecting over an estimated 800,000 workers
- This Government Shutdown Affecting Housing Market
- Besides the Government Shutdown Affecting Housing Market, it is also affecting home buyers, homeowners, and the whole lending industry
- Government Shutdown Affecting Housing Market has now affected the overall mortgage industry where it is affecting home buyers
- Majority of the mortgage process has a government entity involved in the overall processing and underwriting of a loan
- FHA, USDA, VA loans are government insured mortgages
All of these loan programs are affected by the government shutdown.
Government Shutdown Affecting Housing Market And Mortgage Process
There were multiple government shutdowns in the past.
- Past shutdowns did not adversely affect the housing market
- This was due to being a short term shutdown
- This latest government shutdown is a partial shutdown
- Only 25% of the government is closed
- However, over 800,000 estimated federal workers are affected
- We are now entering the fifth week of the shutdown
- Many federal workers are panicking
- This is over 30 days of not getting paid
- There are many federal employees who have home purchase contracts and are awaiting closing their home loans
- Government Shutdown Affecting Housing Market because HUD and USDA are closed
- HUD, the parent of FHA is running with limited staff
- USDA is closed and lenders are not funding any USDA Loans until the government opens
- The IRS is affected by the shutdown and 4506T Transcripts are delayed due to limited staffing
- This causes delays in home closings
Lenders will not fund without 4506T Transcripts Income Verification.
How Government Shutdown Affecting Housing Market
The Government Shutdown on the housing and mortgage markets was minimal until now.
- However, the mortgage markets are becoming to be affected as the shutdown enters into its second month
- Right now, home loans were just experiencing minor delays
- However, the delays are adding up and industry experts expect worse delays are in the pipeline
- Fannie Mae and Freddie Mac conventional loans are not supposed to be affected but it is beginning to affect it
- This is due to income verification by the IRS
- IRS is working on a limited staff
- It takes twice as long to get verification back
- This in turn delays closings
- VA is supposed to be least affected
“Loan Guaranty certificates of eligibility and certificates of reasonable value were delayed,” the VA warned in its September 25th contingency plan.
How Government Shutdown Affecting FHA Home Buyers
HUD is impacted by the government shutdown.
- FHA endorses approximately 15% of the housing market in the U.S.
- FHA’s Office of Single-Family Housing is open but is not operating at full capacity
- It will be operating with limited staffing
- The good news is that FHA will be endorsing FHA Loans during the government shutdown
HUD Announcement On Shutdown
- FHA will try to handle as much task as possible to insure FHA Loans originated and funded by lenders with a limited staff
- HUD warns to expect delays
- Good thing is that FHA’s single-family loan operations are funded through multi-year appropriations
- This means FHA’s budget is not tied to the government’s standoff over funding for the new fiscal year that starts in October
What If Shutdown Lingers On
However, if the shutdown is going to continue, there will be issues. As long as the shutdown is brief, there is no major adverse effect.
Government Shutdown Affecting USDA Loans
USDA will suspend operations until further notice. USDA says that there will not be any guarantees on USDA Loans until the government reopens. USDA Rural Development Loan Programs will be most affected. Borrowers may need to seek other loan program options.
This BLOG On Government Shutdown Affecting Housing Market Was Written And Published By Gustan Cho National Managing Director at Gustan Cho Associates.
