What the Government Shutdown Means for Real Estate

As Congress denied funding for many government operations Oct. 1, Realtors and those with an interest in buying or selling a house might be wondering what it means for them. For those getting a loan, things might slow down a bit in the wake of the shutdown, according to the National Association of Realtors.

The most noticeable changes will trickle down from the Internal Revenue Service and the Social Security Administration. Those changes will be felt when trying to gather the documentation required when applying for a loan.

The IRS is not operating, which means anyone who needs a tax return transcript — often needed when applying for mortgage loans — won’t be able to get one. Transcripts are required for many types of loans, including FHA and VA loans, which total about 25 percent of new mortgages. This will likely most affect the self-employed.

© nebari - Fotolia.com

© nebari – Fotolia.com

The FHA has a skeleton crew working during the shutdown. Those staff members will continue processing loans, but it could potentially be a much slower process, according to an Oct. 2 Bloomberg article.

The FHA will endorse new loans in the Single Family Mortgage Loan Program, but it will not make new commitments in the Multi-family Program during the shutdown, according to the NAR.

And when it comes to the VA Loan Guaranty Program, lenders will continue to process and guaranty mortgages, although delays are expected, the NAR says on its website.

Meanwhile, the Social Security Administration is closed for business. Anyone who needs verification of their social security number — another vital part of the mortgage application process —  won’t be able to get it during the shutdown.

The U.S. Department of Agriculture’s rural development program is closed for business pending government funding. The program makes or guarantees home loans in rural areas.

Fannie Mae and Freddie Mac loans won’t be directly impacted by the shutdown because they don’t rely on government funding. Also unaffected are the Making Home Affordable programs HAMP and HAFA.

“The last thing we need is anything that shakes the confidence in a softly recovering housing market,” David Stevens, chief executive officer of the Mortgage Bankers Association and former head of the FHA, said in a telephone interview with Bloomberg. “If it’s a short-term shutdown, it’s a story about these employees put out of work. If it’s long term, it’s a broader story about the adverse impact to the economic recovery.”

Michele Dawson is a Realty Biz News Contributing Writer