How Is The Shutdown Going To Impact My Home Buyers?

No one is happy about this government shutdown.  Well, maybe some federal employees who are now having a bonus vacation, but the rest of society seems to be annoyed at best. 

For those of us in the real estate business, though, this can be more than a minor annoyance.  This can impact our income and the home buying experience of our clients.  While this is a highly fluid situation and the impacted functions will likely change as it goes on, here are the key effects on our industry at this stage:

• FHA Buyers - HUD should not be significantly impacted as long as the shutdown is brief.  Lenders will still be able to get FHA case numbers and run loans through the approval system.  The key question to ask the lender for your FHA buyers is - "Do you underwrite the FHA loan yourself or do you send it to FHA to underwrite?".  Most FHA lenders underwrite themselves but not all.  FHA will have only a limited staff on hand (4% currently) so if they will be underwriting the file, expect a significant delay.
• VA Buyers - VA financing should be largely un-impacted.  Lenders should still be able to originate VA loans and get Certificates of Eligibility online.
• USDA Buyers -  God have mercy on the USDA buyer right now.  USDA in Indiana is already ridiculously behind.  Their usual 30 day review turn-time has ballooned up to 60 days in the last two months, making most USDA loans take up to 90 days to close.  During this shutdown, USDA's loan function is shut down so no new loans or guarantees will be made.  If you have a USDA buyer in contract, start talking about extensions now.
• Conventional Buyers - No significant impact is expected here.  Whew!

There are certain government functions impacted by the shutdown that will impact all buyers, regardless of loan type.   They are summarized below:

• IRS - lenders send tax transcript verification requests to the IRS for most buyers these days.  During the shutdown, the IRS will not be processing these requests.  If the shutdown is fairly short, this should have little impact, assuming your lender is the type who requests these verifications early on in the process.  HOWEVER - if your buyer is working with a lender who does this at the end of the process, it could create a problem.  You may want to have them ask their bank when they process this verification form (called a 4506-T, if you want to speak mortgageeze to them).
• Social Security Administration - most lenders also verify a home buyer's social security numbers with the SSA.  This will have the same impact as the IRS verification.  If this is a short shutdown and the lender processes these early in the process, it should have no impact.  If the shutdown is long or the lender processes these at the end, it could be a problem.
• Federal Reserve - thankfully, the federal reserve and reserve banks are not funded through the appropriations process so money wiring should be un-impacted.

So what should you do about this?  Truthfully, there is little we can actually DO.  We can COMMUNICATE though.  If we're worried about it, imagine how are buyers in contact are feeling?  Share this information with them.  Have them talk to their lender to further clarify.  If they're still looking for a  home or lender, connect them with someone who can educate and comfort them (hint hint - me).  I'd be honored to give them the information to make this a low-stress experience for them still, despite the shutdown. 

Lori Hiscock is a Sr. Loan Officer at Ruoff Home Mortgage‘s South Bend office.  One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University.  You can connect with Lori Hiscock or apply online here.