How does the Government shut down affect mortgages?

As October 1st hit and the government shut down nonessential positions, we started getting updates.  Mortgage lenders weren't sure what exactly would affect us.  There were worries about FHA case numbers, IRS 4506T tax transcrips and VA and USDA mortgages.

As of now, we are learning more daily.  Right now (subject to change daily!) we can get FHA case numbers.  This is huge as you cannot order a FHA appraisal without a case number. FHA did some homework and made sure the automated system would work for case numbers and several other items.   We can still search for FHA approved condos.  The FHA website may not be completely up to date, but most of the information we need is there.

The VA system is up and running, VA mortgages are not affected by this.

USDA is shut down.  If you were hoping to get a USDA rural development mortgage, they are closed until the shut down is over.  We can process the loans, but we can not get the USDA approval and that is required on every USDA loan.  The underwriting system that USDA uses is shut down so while we can process a loan, we can't run it through the GUS underwriting system to issue a preapproval.

The biggest issue we are seeing is the IRS is shut down and so we can not get the IRS tax transcripts that are required on every file.  With the issues over the last few years, every investor has been requiring 4506T forms completed on all mortgages.  This allows the underwriter to know that the income we are using is the same income the IRS has on file.  Without a 4506T completed in the file, mortgages will not be allowed to close. This may change at some point if the shut down goes on longer than expected, but for now, it is still a requirement.

The second piece that is affecting us is the social security number verification.  This is done on all FHA loans and is also part of the FHA case number approval.  We can get the case number but prior to closing we need to validate the case number and the social security verification is part of that.

As we continue to get updates, these things may change but for now, this is what we are dealing with.  Hopefully this will be a short shut down and we can get back to business as normal! 

UPDATE as of Thursday, 10/3 afternoon!  We have several investors that are allowing us to close loans without a 4506T processed, we will need the signed form in the file, but we can close the loan without sending it to the IRS. I was hoping to see this as it will help everyone until this shutdown is over with!

Leslie Vanderwerf,  NMLS ID#335509, American Mortgage & Equity Consultants – EmailWebsite

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Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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