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Buying a home can have many challenges from critical underwriters to conservative appraisers however on the long list of things that can go wrong with a home loan, everyone would not expect a government shutdown to be a factor. As of 12:00 AM today on October 1st, 2013 the Federal government has now shut down due to a failure of Congress to pass a budget raising the debt ceiling. With over 800,000 Federal employees being furloughed, this may mean home loan delays for homebuyers.Government Shutdown Causing Delays in Home Loan Approvals:
While the federal government may not be directly involved with the home loan process, there are several indirect factors that the Federal government has to help with to close a mortgage loan. Large government bodies may all be suffering from furloughed employees and backups in processing approvals. These delays could affect all loan types including FHA Loans, USDA Loans, VA Loans, and even Conventional Loans.
Home Loan Delays during the Government Shutdown: Regardless if the bank or mortgage company has stated that delays will not happen, this may not be the case. Delays in third party verification may cause delays in real estate closings if income, identities or flood zones cannot be verified.
A common verification for any home loan approval is income verification through a 4506-T IRS tax transcript. A standard mortgage process for all mortgage companies and banks, is to obtain an IRS verification of income so that underwriters and quality control teams can verify that the income a mortgage loan applicant has provided is correct and accurate. The IRS has announced that they will be furloughing non-essential personnel including those whom process tax transcripts. If the income cannot be verified through the IRS, the loan will not close on time.
If a borrower cannot fully document their Social Security Number by providing documents such as a Social Security Card, a bank or mortgage company may process a SSA-89 Form for Social Security Number (SSN) Verification. This document is submitted through the Operations Field Officer at the Social Security Administration and processed as a verification of SSN. According to the Social Security Administration’s Shutdown Contingency plan issued on Sept 27th, this will be one of the many activities that will be discontinued.
List of Government Agencies Affected By the Government Shutdown:
- Housing and Urban Development (HUD)
- Federal Housing Administration (FHA which insures FHA Loans)
- Veteran’s Administration (VA for VA Loans)
- Internal Revenue Service (IRS which verifies income on tax returns)
- United States Department of Agriculture (USDA for Rural Development Loans)
- Social Security Administration (SSA which verifies Social Security Numbers)
- Federal Emergency Management Agency (FEMA which helps with flood insurance)
This list of government agencies that will be affected by the government shutdown, provides critical services to fund, verify, insure and close mortgage loans. A furlough of employees could mean long turn times and delays in real estate closings.
How Homebuyers will be affected from the Government Shutdown:
Chances are that Congress will quickly pass a resolution to re-fund the Federal Government within three days, however if this does not happen, they may see delays in mortgage loan funding for any home loan type. During this time of uncertainty, it is a wise plan to expect delays and plan accordingly. The details of individual delays may not be immediately available until an issue occurs. Homebuyers and sellers should be vigilant in requesting updates from their loan officers and real estate agents as well as work closely with them to ensure a quick and smooth real estate closing. Unforeseen issues may arise such as IRS transcript verification delays, government insuring delays or even flood insurance delays.
Contact Info:
Name: Anthony Bird
Email: Send Email
Organization: Riverbank Finance LLC
Address: 1675 Michigan St Ne Suite E
Phone: 800-555-2098
Website: http://riverbankfinance.com
Release ID: 23325
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