What Will Happen To FHA Loans In The Wake Of A Government Shutdown?
Not much...in the near term. There will be a furlough of some personel which will obviously result in slower processing and other delays. If the shutdown lasts longer than a few weeks, we will all be in a mess. I recieved an open letter from the Mortgage Bankers Association and here is my brief synopsis on what the impact will be.
Some useful info about the Gov’t shutdown and how it COULD disrupt the lending flow….
The ones highlighted in red could be the most disruptive to production flow:
FHA:
o FHA will be able to endorse single family loans during the shutdown, however, only a limited number of FHA staff will be available to underwrite and approve new loans so the process may take longer.
o Limited FHA staff will be available to respond to questions, emails or other correspondence.
o Lenders will be able to obtain an FHA case number from the FHA Connection.
o If FHA runs out of commitment authority during a shutdown, then lenders’ Lender Insurance (LI) approval will be temporarily suspended.
o CAIVRS will be available to determine if a borrower has a delinquent federal debt.
o FHA Total Scorecard will be available.
o If a lender submits loans for approval if the lender is in pre-closing, FHA staff will not be available to underwrite and approve loans.
o FHA will collect the Upfront Mortgage Insurance Premiums (UFMIPs) during a shutdown.
o Lenders are required to submit monthly MIPs to FHA during a government shutdown.
o FHA will not perform any post technical endorsement or Quality Assurance Reviews during a government shutdown.
GNMA, FNMA, FHLMC:
o No significant affect
VA:
o The Department of Veterans Affairs (VA) will continue to operate if there is a government shutdown which means lenders will be able to continue originating VA-guaranteed loans. Both lenders and borrowers will be able to obtain their Certificate of Eligibility online, and they will still be able to submit applications and follow up on COEs that require more research with the Atlanta Eligibility Center. Lenders can and should continue to remit funding fees through the Funding Fee Payment System.
USDA
o USDA has not issued guidelines yet, but indications are that they may be similar to those in the 2011 contingency plans issued by OMB. Under this plan Rural Development would cease all but essential functions and no new loans or guarantees will be made.
Social Security
o For verification of borrowers’ social security numbers, lenders rely on either third party vendors or the Social Security Administration (SSA). In previous shutdowns, SSA has only retained employees that deal directly with the processing of new claims and benefits; therefore lenders may not be able to continue to verify social security numbers through SSA
IRS (4506-T)
o The Internal Revenue Service (IRS) has indicated that they will not process any forms, including issue tax return transcripts (Form 4506 T), should a government shutdown occur. Without tax transcripts, loan processing may be delayed, depending on individual housing agency requirements and aggregator guidelines.
FEMA
o FEMA is likely to provide information through a bulletin in the case of a government shutdown. While many functions will be unaffected, because of their use of contractors and public/private partnerships, and it is likely that mapping issues or amendments will be impacted
Should this shutdown last anything more than a couple of weeks then all bets are off…on everything. Economic growth, the ability to originate a loan, interest rates, equity prices, etc.
A short term shutdown should have limited effects so don’t fret just yet. There is a distinct possibility that this will be cleared before much time goes by so for now educate your clients on what’s occurring. The TV news channels and newspapers are eating this up and love whipping the masses up into a frenzy to increase ratings and sales. Be the calm in the storm by providing accurate information in a timely manner and guiding them through this.
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