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.

Table of contents "Click Here"

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

The HUD report states

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.