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Many jittery home buyers and sellers fear the shutdown of the federal government may delay their closings. The Salt Lake Board of Realtors said the shutdown should not have a major impact on the mortgage loan process—other than to spook potential buyers.
“For buyers right now, it’s just a lot of uncertainty,” said Dave Frederickson, president of the Salt Lake Board of Realtors.
The Federal Housing Administration (FHA) and Veterans Affairs mortgage loan insurance programs make it possible for buyers to purchase a home with lower down payment requirements. These programs will continue to operate, although reduced staffing levels in those agencies may lead to delays, said Rex Rollo, CFO of America First Credit Union.
During the shutdown, the FHA will continue to endorse new loans for single-family home purchases, but will not make new commitments in its multi-family program, said Frederickson.
About 25 percent of new home loans are backed by the FHA.
America First is one of the state’s largest mortgage loan providers, with 6,750 such loans in 2012, second only to Wells Fargo in the Utah market for total loans. Rollo said the credit union is continuing to work with buyers to process mortgage loans.
“America First is a designated underwriter for FHA and VA,” said Rollo. This status allows the credit union to do most of the underwriting work in-house, rather than turn it over to FHA staff.
Partial shutdowns in other government agencies could also delay mortgage loan closings. The Internal Revenue Service, for example, will not be providing the tax transcripts that many lenders require in order to verify borrower income. And the Social Security Administration will not be able to verify borrower Social Security numbers, said Frederickson.
“Federal housing programs—like Fannie Mae, Freddie Mac and FHA—do not require tax return verification,” said Frederickson. “Some lenders, like U.S. Bank, have already waived the tax return verification policy. Other lenders are directly selling loans to Fannie Mae or Freddie Mac. Most home buyers who need a mortgage will be able to secure one, even during the government shutdown.”
Rollo fears the uncertainty surrounding the government shutdown may cause potential buyers to back away from the market. The turmoil “tends to take the excitement and the urgency out of the purchase,” he said.
But Frederickson said now is still a good time for buyers to shop for a home. “The interest rates are incredible, and the inventory is slowly growing again,” he said.
For most buyers, said Rollo, the shutdown will have little or no impact. “If this only goes on for a week, I don’t know that it’s going to be very significant,” he said. “The longer it continues, the more effect it’s going to have.”
He added, “I don’t think it’s going to stop the mortgage from closing. It’s just going to take it longer.”
“I’m not seeing a reason for concern for buyers or sellers right now,” said Frederickson. “It’s just business as usual.”