With the uncertainty surrounding the government shutdown and many borrowers and companies working with government-backed loans (USDA, VA, FHA), we have gathered some information on the current and possible future impact on these loans.
VA and FHA Loans
For the most part FHA loans can continue to move forward albeit with a limited staff. This means that for the duration of the shutdown, the loans will continue, however with less workers; underwriting times and new loan approvals will slow.
“FHA will be able to endorse single family loans during the shutdown.” – CNN Money
Similarly VA Mortgage will also move forward, but again with significant delay.
“Mortgages purchased and securitized by Fannie Mae and Freddie Mac will be unaffected because their operations are paid for by fees charged to lenders. And the Department of Veterans Affairs will continue to guarantee mortgages for Americans that have served in the military since these loans are funded by user fees as well.” – Forbes
USDA Loans Frozen
The shutdown has completely frozen the process for USDA loans. One look at this list of government departments shows that all of the USDA and Rural Development (RD) agencies related to loans are either partially closed or completely shut down. The USDA staff had already been reduced prior to this and turn times have slowed, this will obviously further delays.
Another source points to the possible unavailability of important tax documents bringing a halt to the process for many borrowers of all loan types.
“4506-T (which are income tax transcripts)- will NOT be available during the shut down apparently.” – Oregon Mortgage Blog
CNBC, along with the previously noted Forbes article also suggest that this government shutdown could slow housing recovery. The shutdown creates some new uncertainty in mortgage rates as well. The newly enjoyed 3 month rate lows could rise on market fears, although they could also decrease further if investors head back to bonds. The uncertainty can make locking a loan a difficult decision.
It is in everyone’s best interests that this is resolved quickly. Until that time, if you have a loan in process, keep up the lines of communication with your loan officer. They should be able to tell you what if any impact the government shutdown is having on your home loan.