I’m certain you are as frustrated as I am currently with the temporary shutdown on parts of the Federal Government. Although it is only a partial shutdown, it still affects millions of people that are either working without pay or who have been furloughed. Several of my clients have asked how the shutdown will affect the housing and mortgage market.
Although more that 90% of all loans are underwritten, insured or owned by the government and its affiliated entities, initially the mortgage market is likely to have limited impact. What will change is how long the process takes. Some homebuyers will quite likely see closing delays. Here are a few ways the shutdown could impact a real estate transaction:
- In most cases Fannie Mae and Freddie Mac will still process loans because these agencies are not funded by the government. However, verification of employment is a key requirement to getting loan approval. So, if you are a Federal employee affected by the shutdown, your employment verification may be denied or delayed.
- Loans insured by the Federal Housing Administration (FHA) may be delayed due to the reduced staff and increased backlog. The U.S. Department of Veteran Affairs (VA) is not impacted by the government shutdown because the VA staff that approves VA loans are paid through borrowing fees.
- Federal flood insurance is not affected because of legislation passed in December 2018 to extend the National Flood Insurance Program through May 31, 2019
- Lenders may experience delays receiving verification of income and identity through the Internal Revenue Service (IRS) or the Social Security Administration to process the loan.
All these delays may create frustration for a buyer or seller. Markets can adjust for a short term shutdown, but a long-term shutdown may have a greater impact. With over 30 years in the real estate business, I have worked with some of the best in the mortgage and lending side of the business. If you need help buying or selling a home, please contact me so we can discuss the current market situation and begin a path to achieving your goal.
Additionally, for a complete list of Federal agencies affected by the shutdown, click on the link below.