Here’s how the shutdown is affecting homebuyers and homeowners – and what you can do about it.
There’s good news for most FHA-qualified homebuyers: Single-family FHA loans are being funded, even during the shutdown. FHA home equity conversion mortgages (known as reverse mortgages) and FHA Title I loans (financing for permanent property improvements and renovations) are the exception – and won’t be processed during the shutdown. The processing of VA loans will continue, according to the Mortgage Bankers Association, but you may have to wait.
Support staff at the VA and at the Department of Housing and Urban Development who handle underwriting or entitlement questions “are unavailable, so FHA/VA borrowers may experience delays,” said Ted Rood, a senior loan officer in St. Louis.
Because of the shutdown, VA and FHA spokespeople weren’t available to provide an estimate of how many borrowers could have their loans delayed. But the most recent data suggest delays could potentially affect thousands of borrowers.
The U.S. Department of Agriculture isn’t approving new USDA loans during the shutdown. According to USDA data, the department guaranteed or made about 10,000 single-family loans each month in the most recent fiscal year that ended in September.
“The IRS has not been processing 4506-T tax transcripts – tax return verifications – which are required on most files, although that service is restarting,” Rood said. “There will still be a backlog due to requests that have been piling up since Dec. 22.”
Self-employed borrowers are particularly affected by the lack of access to federal income tax transcripts. Some lenders may accept signed tax returns in lieu of transcripts.
And the shutdown could also stall verification of employment for government employees.
If you need flood insurance: Getting flood insurance if you’re buying in a flood-prone area shouldn’t be a problem despite some earlier troubled waters.
The Federal Emergency Management Agency announced on Dec. 28 that it would resume selling and renewing flood insurance policies. That reversed a Dec. 26 decision to suspend policy sales and renewals during the partial shutdown.
“This new decision means thousands of home sale transactions in communities across the country can go forward without interruption,” National Association of Realtors President John Smaby said in a news release.
If you own a home but aren’t getting paid: If the lack of a paycheck has you worried about paying an existing mortgage on time, contact your loan servicer immediately. Explain your situation and ask about alternatives.
A short-term loan that makes up for missed pay is another possible option. Navy Federal Credit Union, for example, is offering one-time zero percent APR loans of up to $6,000 for federal employees and active-duty members of the Coast Guard who typically use direct deposit for their paychecks.
Talking with your lender before you miss a payment could keep your credit score from suffering a hit.
“We will work with each customer individually and can help with things such as late fees and not reporting to the credit bureau,” Tom Kelly, a JPMorgan Chase spokesman, said in an email.
If you’re considering a mortgage rate lock: Mortgage rates already had been falling when the shutdown began Dec. 22, and they fell more than an eighth of a percentage point in the two weeks that followed. That’s why the shutdown could give you a chance to grab a good mortgage rate.
“Our expectation is that this will be a short-term blip and you’ll be glad if you were able to take advantage of the drop in mortgage rates,” said Danielle Hale, chief economist for Realtor.com. Her forecast assumes that the shutdown won’t last for months and that mortgage rates will rise this year.
Business as usual
Shutdown-related issues are causing delays of up to two weeks on typical loans, according to Alan Rosenbaum, CEO and founder of Guardhill Financial in New York City. Still, one industry leader thinks it’s mostly business as usual.
“The government shutdown is having a minimal impact on the mortgage industry,” said Mat Ishbia, president and CEO of United Wholesale Mortgage. “Lenders are closing thousands of loans a day. Everything is moving forward.”
As well, a survey Monday of 2,211 members by the National Association of Realtors found that 75 percent of respondents said the shutdown hasn’t had an impact on contract signings or closings.
Of those Realtors who said the shutdown had affected transactions, a quarter said a buyer decided not to buy because of general economic uncertainty; 17 percent had clients whose closings were delayed because they were getting USDA loans; 13 percent said a client’s closing was delayed because of IRS income verification issues; 9 percent reported delays with FHA loans; and 6 percent with VA loans.
And 9 percent said they had a client who was a federal employee who decided not to buy because of lost income or furlough.
This article originally appeared on the personal finance website NerdWallet. Holden Lewis is a writer at NerdWallet.
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