With the US government still in shutdown mode since December 22nd of last year, many prospective home buyers and current homeowners have reached out wanting to know how it could affect their home purchase or refinance. Let’s shed some light on how the shutdown is impacting specific processes and loan programs in the industry:
IRS Tax Transcripts
With the IRS remaining closed during the partial government shutdown, mortgage lenders have been unable to verify anyone’s tax returns and annual income, an integral part of the loan approval process. However, just this week we received a BIG break in that the IRS has agreed to continue processing tax transcript requests as of Monday January 7th. Please note, it may take them a few weeks to get caught up, but this is a great sign for everyone looking to obtain mortgage financing in the near future, because it eliminates
Social Security Validation
Thankfully, the Social Security Administration is covered by one of the appropriations bills already passed and remains open during this partial government shutdown. Social Security validation is another integral part of the loan approval process for some lenders, so this more positive news for those in the middle of buying or refinancing a home.
National Flood Insurance Program (NFIP)
Under Congressional and industry pressure, FEMA has reversed its position on the impact of the shutdown on the National Flood Insurance Program (NFIP). FEMA announced that “NFIP insurers may resume the sale, renewal and monetary endorsements for flood insurance policies”. The FEMA official added that the change is retroactive to December 21st. Again, this is GREAT news for those looking to buy or refinance a home located in a flood zone.
FHA Home Loans
The Department of Housing and Urban Development, which oversees FHA, indicated they will still be able to endorse all FHA loans except ‘HECM’ (reverse mortgage) loans. So, those looking to obtain an FHA mortgage can breath a big sigh of relief, as the shutdown will not affect your purchase or refinance.
VA Home Loans
VA is covered by an appropriations bill that has already passed and will remain open should a partial government shutdown take place. Veteran home buyers can rejoice, because the shutdown will not affect their ability to close.
USDA Home Loans
USDA will not issue commitments or guarantees during a partial government shutdown. This is a big deal. Basically, this special 100% financing program will no longer be available until the shutdown ends, leaving a lot of potential home buyers on the sidelines. If you fall into this category, please get in touch with a mortgage professional for advice and potential alternatives.
Conventional Home Loans
(Fannie Mae / Freddie Mac)
Fannie and Freddie are not directly affected by the government shutdown and those looking to buy or refinance their home using a conventional mortgage will be able to move forward without delay.
Final Thought
As of now, most mortgage loan programs are fully operational with the exception of USDA. Our advice – Do not sit and wait on the sidelines for the dust to settle and the government shutdown to end. With interest rates coming back down in the last few weeks (most likely temporarily), now could very well be THE perfect time to buy or refinance your home.
