As you might expect, there are plenty of stories about how the government shutdown is affecting folks across the country. Let’s focus on the real estate market, though. Here are some of the stories making the rounds:
Mortgage Bankers Call for End to Government Shutdown (DSNews)
David Stevens, president and CEO of the Mortgage Bankers Association, urged an end to the shutdown:
“Lenders processing loans that need tax transcripts, social security number verification, or FHA [Federal Housing Administration] loans face longer delays and reduced functionality from HUD, IRS, and the Social Security Administration,” Stevens said.
Mortgage lenders still locking rates and closing – for now (Inman)
If the shutdown drags on, home sales and closings will suffer because lenders need the IRS to process forms.
We are still taking applications, locking rates, processing our little hearts out, and closing. Our principal problem: In the post-bubble spasm, authorities decided that ALL borrowers should produce two years’ tax returns […] And authorities decided that neither the borrowers nor their CPAs could be trusted to give us true copies, so we must pull transcripts from the IRS (the dreaded 4506T).
The IRS is shut. When it reopens it will have to process a backlog growing by the hour.
What the Government Shutdown Means for the Mortgage Market (WSJ)
As the Inman story pointed out, the lack of the IRS is going to be the biggest problem, but having no FHA isn’t helping.
Banks have grown more dependent on the IRS transcripts, which verify a borrower’s reported income, to ensure that they won’t be forced to repurchase a mortgage should it later default and should the investor, such as Fannie Mae or Freddie Mac, discover the borrower had misrepresented his or her income.
If a shutdown lasts longer than two weeks, the mortgage market could face other hardships. The FHA, for example, could run out of funding authority, making lenders more cautious about approving FHA-backed loans. Government workers that have been furloughed could run into trouble making mortgage payments.
Housing Market Optimism Tempered by Shutdown (Mortgage News Daily)
Consumers fears about the shutdown’s impact are showing in how they view housing.
While consumers continue to be generally upbeat toward the housing market, their attitudes appear to have plateaued or even decreased over the last three months.
Looking for more information? NAR has a frequently updated page dedicated to the effects of the shutdown: Realtor.org/articles/government-shutdown-updates.