Impact of the Shutdown on the Mortgage Industry

As the government shutdown is nearing its end and its employees have a chance to get their jobs back, many are wondering about the effects that the shutdown has had on the mortgage industry. Beyond those who were furloughed being unable to make money, many others were unable to purchase homes or get a mortgage due to the IRS being unable to process the 4506-T form. Additionally, USDA loans were on pause during the shutdown as well.

“Outside of the obvious process impacts of submissions, approvals and income there are immediate and lingering tangential impacts to housing and housing finance markets. With over a decade of shenanigans by members of Congress who are not doing their jobs, the consumer and investor uncertainty continues to restrain any meaningful recovery,” said Mark Dangelo, president, MPD Organizations. “Without the extraordinary impacts of the Federal Reserve, the economy would be at zero growth from its 2009 levels and joblessness would have remained at over 8.5 percent.”

Because of the shutdown, it has become a major problem that loans were not making their way to borrowers and that forms were delaying the sale of homes. Everyone who was in the process of buying or selling was essentially put on hold. Specifically, those who needed an IRS verification of income were stopped in their tracks. Mortgages that were beyond that stage and were scheduled to close during the shutdown may have been able to do so but the mortgages in the beginning stages definitely suffered.

Ultimately, even once the shutdown is completely over and everyone is back at work, there will no doubt still be a delay due to the amount of paperwork that has piled up.

“There may be a trickledown effect for anything that may have started the process during the two weeks of shutdown. My guess is now that the shutdown has been ended, they will get back to the way things have been, a relatively positive outlook for housing and lending ... especially purchase transactions,” said  Gregory Teal, president and CEO at Ernst Publishing Company.

Has your mortgage been effected by the shutdown?

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