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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Freddie Mac on the Government Shutdown

Freddie Mac is allowing borrowers who are not being paid as a result of the government shutdown to still have their mortgages delivered to Freddie Mac as long as they meet all the usual requirements and the borrower is expected to return to work after the shutdown ends.

"We're issuing this guidance to help ensure the continued smooth operation of the mortgage market during the temporary shutdown of the federal government. Today's bulletin is intended to give lenders the certainty to continue approving and delivering new mortgages that meet Freddie Mac guidelines to eligible borrowers, such as federal employees and contractors," said Dave Lowman, executive vice president, Single-Family Business at Freddie Mac. "During the temporary shutdown. We are also reminding servicers of our forbearance options to assist qualified homeowners with Freddie Mac mortgages to minimize the shutdown's impact on our nation's families and communities."

Freddie Mac will continue monitoring the current situation and promise to provide guidance if the shutdown lasts for a prolonged period of time. Right now, they have relief policies available to both public and private sector employees who are affected by the shutdown. This allows servicers to provide forbearance to eligible borrowers that must not be reported to credit bureaus. The forbearance can range from 3 to 12 months.

Servicers can also accept a borrower's most recent signed federal tax return even though the IRS is unable to process forms right now. This is helpful when tax information is needed to evaluate a borrow for a loan through Freddie Mac.

As always, Quest Loans is here to answer any questions you may have regarding the mortgage industry during this shutdown. Call us at 888-883-5252 anytime!

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President of MBA Calls for End of Shutdown

The president and CEO of the Mortgage Bankers Association (MBA), David H. Stevens, has recently issued a statement regarding the government shutdown and the affect it is having on the housing market. "The federal government shutdown will have a growing impact on the housing market the longer it continues. If this shutdown is temporary, the ones affected most will be out of work federal employees," he says. "However, the longer it goes, the greater impact it will have on borrowers, the housing market and the national economy."

He continues, "lenders processing loans that need tax transcripts, social security number verification, or FHA home loans face longer delays and reduced functionality from HUD, IRS, and the Social Security Administration. Different loan programs have different requirements, and these disruptions impact lenders in different ways, leading to confusion and fear among borrowers about whether they will be able to close on a home purchase or refinance. There are significant impacts on multifamily lenders, as well. Rental housing properties awaiting FHA financing cannot move forward.

“The furloughs can disrupt time-sensitive mortgage transaction deals by interfering with borrower lock agreements and causing interest rate disparities from the time of closing to the time the loan is securitized.

“For these reasons there must be a resolution so that borrowers and lenders are able to return to business as usual.”

We don't know when the shutdown will end but so far there have already been damaging affects on the housing market. If you have any questions about it, give us a call! 888-883-5252.

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What The Shutdown Means For The Housing Market

Since Tuesday morning, many government services were shut down or cut back. Congress is battling back and forth trying to resolve their issues. This is the first government shutdown in 17 years. "Essential employees" are still allowed to work but as many as 800,000 "non-essentials" are not allowed in government buildings and they don't know when they'll be paid again.

As you may know, the central issue being debated is Obamacare.  According to House Speaker John Boehner (R-OH), "The House has voted to keep the government open, but we also want basic fairness for all Americans under Obamacare."

While 800,000+ employees are on the sidelines, the members of Congress are still working and because of the 27th Amendment, all 533 of them are still being paid.

President Barack Obama has said "the idea of putting the American people's hard-earned progress at risk is the height of irresponsibility, and it doesn't have to happen. Let me repeat this. It does not have to happen."

Congress and the President continue to disagree and have yet to reach a resolution. What does this mean for the housing industry? According to the president of NAMB- The Association of Mortgage Professionals, Don Frommeyer, "the shutdown isn't going to help the U.S. economy continue to grow and interest rates across the board could very well increase, depending on what the bond market does during this time."

As of September 27th, The U.S. Department of Housing & Urban Development (HUD) has indicated that the FHA will continue to endorse single-family loans during the shutdown. Of their 8,709 staff members, only 349 of them are "essential" and continue to work. However, an even more limited number of FHA staff is allowed to do their underwriting and approve new loans. So right now, anyone in the process of purchasing a home may see delays since the shutdown will cause these processes to take much longer than usual.

Those facing foreclosure right now will still have loss mitigations continue but the FHA will not approve any lender applications right now.

If you have any questions about how the shutdown could be affecting your mortgage process, feel free to call your loan officer or give us a call at 888-883-5252 and we will try our best to answer your questions!

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