How A Government Shutdown Could Affect Mortgages

Mortgage and Lending with Movement Mortgage NMLS # 574681


After weeks of bickering, arguing, and filibustering between the two arms of Congress, the Senate rejected the House's budget bill today. The current resolution, passed in March oin order to resolve the "debt ceiling" controversy, expires today. The failure to get a bill passed all but guarantees a government shutdown, which would start at midnight tonight. This would be the first shutdown in 17 years. 

Many agencies, such as the FBI, TSA, FEMA, Border Patrol, and Social Security, will continue to run as usual.   Two agencies that could be greatly affected are FHA and VA. According to HUD, these agencies could continue processing loans (FHA insures loans and VA guarantees loan; neither actually lends money). Since 96% of the staff will be on furlough, it's hard to imagine how they'll be able to handle the volume. 

On the other hand, Fannie Mae and Freddie Mac won't be affected. These agencies aren't controlled by the government, and pay for their operations out of the fees they charge lenders.

So if you're applying for a conventional loan (or have one in process), your loan shouldn't be affected. But if you're obtaining a government-backed loan, the worst that can happen is FHA and VA come to a halt until there is a resolution in congress. The best case is that they continue to process transactions, but the heavy volume could equal very long waiting periods. 

BIG TIP: Help your friendly loan officer by getting all the required documentation back to him/her as soon as possible to help expedite the loan process. 

Thanks and have a great day.

Posted by

JP Marzano

NMLS ID# 574681

O: 312-654-7216

M: 312-608-1555

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