How the government shut down will affect your business

By
Mortgage and Lending with Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, NMLS #138061 MMCD #1141
https://activerain.com/droplet/44WL

 

How the Shutdown Will Effect Your Business

 

     So it's been a day and the government is still shut down.  What exactly does that mean?  I'll spare the humor and all the things I'd like to say - basically it means that some services are available, and others aren't. 

 

     While many vital services are still in action and exempt from shutdown, many others have been frozen, and could inadvertently have a pretty poor effect on the housing market, especially if this shutdown lasts for more than a couple days.

 

USDA loans - the USDA loan program is frozen.  Since files are approved by USDA offices directly, there will be no more guarantees or housing loans issued by the USDA offices until the shutdown is over.  This could have a pretty terrible effect for those who live in rural areas or need 100% financing. 

 

VA loans - VA loans should be in full swing, as the program is run based mostly on fees.  Where there might be an issue is when someone needs a VA certificate.  When the government shut down in the 90's, there was a delay in obtaining certificates, and this will likely be the case again.  New applications will be taken, and files will be underwritten and funded, though.

 

FHA loans - FHA loans aren't expected to feel a real impact from the government shutdown so long as the shutdown doesn't last for a long period of time.  HUD is running at a significantly reduced staff, though, so getting information and paperwork to & from HUD could take a lot longer than usual.  The good news is, loans will still be insured & they will still have staff delegated to underwriting. 

 

Conventional loans - while many are stating the shutdown is 'no big deal' for conventional financing, this is simply not the case.  Yes, conventional loans will be applied for, underwritten, approved, and funded.  BUT, over the past few years, as we all know, lenders have taken extra steps to fight fraud, and 2 of these steps are social security verifications and IRS 4506-t transcripts.  These services will be unavailable, and therefore loan files may be put on hold until the shutdown is over. 

 

     Some borrowers will be in more trouble than others - for self-employed borrowers, they may be at the mercy of the shutdown as a work around for 4506 transcripts isn't currently available.  Also, for any government employees that are in the midst of the loan process it will be extremely difficult to get any verifications of employment done.

 

   I'd strongly recommend being proactive in making sure none of our clients are surprised by any potential delays - sellers should understand that the shutdown can cause delays at no fault of buyers.  Anyone buying or refinancing should be aware of what type of loan they are getting, and if the potential is there for delays, they should plan accordingly.

 

     Hopefully in a day or 2 this blog post won't matter & things will be running smoothly once again between our Democratic and Republican leadership friends elected officials, but as a preemptive stragegy, it would be a good idea to know this information.  And for an added benefit - next time the government shuts down you'll already know what to be ready for.

 

 

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Re-Blogged 11 times:

Re-Blogged By Re-Blogged At
  1. Gina Chirico 10/02/2013 10:38 PM
  2. Anna Hatridge 10/02/2013 10:47 PM
  3. Terry McCarley 10/02/2013 11:34 PM
  4. Chuck Carstensen 10/03/2013 12:00 AM
  5. Jeanne Kozak 10/03/2013 12:39 AM
  6. Dale Cosack 10/03/2013 01:42 AM
  7. Karen Steed 10/03/2013 03:17 AM
  8. Lynn Maupin 10/03/2013 04:06 AM
  9. Brigita McKelvie, Associate Broker 10/03/2013 04:38 AM
  10. Candace Breen 10/03/2013 05:56 AM
  11. Wayne and Jean Marie Zuhl 01/20/2018 05:12 AM
Topic:
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Tags:
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Rainmaker
370,263
Travis "the SOLD man" Parker; Associate Broker
Team Linda Simmons, Enterprise, AL 36330 - Enterprise, AL
email: Travis@theSOLDman.me / cell: 334-494-7846

A local lender said that their Corporate said on USDA to go ahead "as normal" for about a week or so. THEN, get worried.

Oct 03, 2013 10:17 AM #78
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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

John - I've seen a lot of people with the same reaction!  It'll cause a lot of harm, but if it leads to real change who knows, maybe it's worth it.


Travis - What they're likely doing is accepting applications/getting the ball rolling - USDA files have to go through both underwriting at a lender and underwriting at the USDA office for approval - there are 0 staff delegated at the USDA offices to underwrite loans during the shutdown.  Lender is smart to get things rolling, but misleading if they're saying the process can flow smoothly as-is.  That 'about a week' could just be to get things going, order title, etc.  If it goes on for a week, we can also expect a backlog/delay of all the files on hold waiting for the gov to flip the switch back on - hope we don't have to worry about it much longer.

Oct 03, 2013 10:30 AM #79
Rainer
159,100
Monique Ting
INET Realty Honolulu, HI - Honolulu, HI
Your agent under the sun

Thank you for clarifying the matter. As for the loan applicants who are federally employed, a prolonged  shutdown may have devastating effects. Let's just hope that this mess will be over soon!

Oct 03, 2013 11:40 AM #80
Anonymous
Kirk Knight

Good info from which to start John. I also contacted the invididual lenders in my deals for the facts, as they do vary by lender. In the runup to the shutdown I anticipated this possibility and tried to innoculate my pending transactions by getting docs through underwriting. 

I previously co-invented and co-founded an online financial platform that had to deal with a mix of private data and government data, Federal Reserve wires, IRS, FICO, VISA and AmEx. What people don't realize is that we rely upon government services such as the IRS for a wide range of functions that must be reliable. Hence the need for 4506T to verify income. Note that you pay a higher fee for the risk of unverified information. We constantly rely upon government data for unbiased information.

I have what I hoped would be my last ever short sale in process. It's scheduled to close in a couple weeks but the lack of most recent 4506T on BOTH sides of the transaction is likely to cause problems. I sent a notice on Equator on the 30th warning the closer. My normal sales were past the underwriting process before the end of September.

Many of my buyers work in San Francisco/Silicon Valley, run small businesses, or have large stock portfolios and options in their companies, so their non W-2 income is a key part of their qualifying.

I just had a REALTOR association event planning meeting with 2 lenders in the group - one independent and the other a BIG bank. The big bank claims they will waive the 4506T requirement for W-2 employees. But the self-employed will be delayed.  Nearly the same response form the independent but there are a couple mortgage originators that will cooperate albeit at a higher risk premium. Risk is never free.

---

On a related note: There is so much disinformation on the subject of the shutdown, the budget, the deficit and debt, as noted in many of the comments, it's no wonder we have a shutdown. You are free to have an opinion. But educate yourself on the distinction between a fact and an opinion. Question everything you hear or read and dig for original sources.  I read John's helpful comment and then pursued the original source of my lenders. Just as we real estate professionals seek to provide our clients with accurate and precise information based upon facts, going so far as to retain licensed inspectors, appraisers, lenders, attorneys and accountants, we owe it to ourselves to check the "facts" we repeat.

The distinction between misinformaiton (an accidental error) and disinformation-the method employed by the Soviets is noted below:

 

"Disinformation is intentionally false or inaccurate information that is spread deliberately. It is an act of deception and false statements to convince someone of untruth. Disinformation should not be confused with misinformation, information that is unintentionally false.

"Unlike traditional propaganda techniques designed to engage emotional support, disinformation is designed to manipulate the audience at the rational level by either discrediting conflicting information or supporting false conclusions. A common disinformation tactic is to mix some truth and observation with false conclusions and lies, or to reveal part of the truth while presenting it as the whole."

 

source:   http://en.wikipedia.org/wiki/Disinformation

Oct 03, 2013 12:07 PM #81
Rainmaker
1,143,921
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

hey John, you know my take on this and anything with this administration I can talk for 8-10hrs so to be brief... yes anyone who thinks that their conventional loan is safe has NO CLUE what they are talking about

Oct 03, 2013 01:30 PM #82
Rainmaker
645,597
Bill Reddington
Re/max Southern Realty - Destin, FL
Destin Florida Real Estate

Thiink I will keep pushing forward and deal with the issues as they come up. Have a great portfolio lender here. Guess they will get some more business.

Oct 03, 2013 02:07 PM #83
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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Monique - that's probably the scariest part.  Really hoping no one loses a home because of this nonsense


Kirk - thanks for the comment, hope you don't run into any issues that can't find a work around


David - thanks, I'm with ya!  Not happy with a lot of things, it was tough to write this without taking shots where I think shots are well deserved.


Bill - That's a great gameplan - you may not even need portfolio so long as conventional lenders have work arounds in place.  Good luck

Oct 04, 2013 09:53 AM #84
Rainer
441,480
John Dotson
Preferred Properties of Highlands, Inc. - Highlands, NC - Highlands, NC
The experience to get you to the other side!

John,  Thankfully the only government loan impact we have in our market will be on conventional.  I pity the poor folks who depend on VA & FHA - shutdown or not!

Oct 06, 2013 01:49 PM #85
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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

John - thanks for the comment.  It's definitely tough in those markets right now.  Normally FHA & VA are easily accessible & very successful programs.  Seems the only thing we can rely on the government for these days is a lack of reliability.

Oct 07, 2013 07:24 AM #86
Rainmaker
1,942,785
Andrew Mooers | 207.532.6573
MOOERS REALTY - Houlton, ME
Northern Maine Real Estate-Aroostook County Broker

Hear you on USDA loans...shift gears, make the most of it and don't stop, get fearful and waste emotion. Other financing, cash sales, home equity on their old homes before buying the new one. And land sales with owner financing, waterfront properties...mix it up and don't have all the eggs in one basket works best.

Oct 07, 2013 10:26 AM #87
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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Andrew - thanks for the comment, and I agree - plenty of opportunity out there for loan products not affected by the shutdown.  This is dragging out though now, hope it ends soon!

Oct 08, 2013 06:40 AM #88
Rainmaker
1,292,139
Wayne and Jean Marie Zuhl
Samsel & Associates - Clark, NJ
The Last Names You'll Ever Need in Real Estate

Thank you for clarifying. This is a difficult time for many people.

Jan 20, 2018 05:07 AM #89
Rainmaker
4,955,590
Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

Good morning, John Meussner I just saw this post on a reblog from Wayne and Jean Marie Zuhl..... I sent the link to the Todaro Team members....

Jan 20, 2018 05:35 AM #90
Rainmaker
3,798,450
Dorie Dillard CRS GRI ABR
Coldwell Banker United Realtors® ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good morning John Meussner  ,

Wow so glad that Wayne and Jean Marie Zuhl re-blogged your post this morning..very timely information. I was thinking I was home free with conventional loans on my buyers but just doubled checked and are all approved.....we be checking on Monday morning.

Jan 20, 2018 09:05 AM #91
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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Thanks Barbara Todaro ! This time around it looks like we’re ok on USDA loans but still waiting to hear an update on how we’ll be handling 4506t requests

Jan 20, 2018 09:47 AM #92
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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Hi Dorie Dillard ! Yep check with your lenders Monday but the impact shouldn’t be huge for loans at the finish line!

Jan 20, 2018 09:48 AM #93
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John DL Arendsen
CREST BACKYARD HOMES, ON THE LEVEL GENERAL & FACTORY BUILT HOME CONTRACTOR, TAG REAL ESTATE SALES & INVESTMENTS - Leucadia, CA
Crest Backyard Homes "ADU" dealer & Contractor

Love your ommonsensical and deductive resaoning John Meussner Great info and please keep coming to our meetups. Always love hearing from you.

Jan 20, 2018 01:49 PM #94
Rainer
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Kirk Knight
Alain Pinel Realtors - Alameda, CA

Look through your recent escrows and note how many loans required an IRS Form 4506T and during what part of the loan approval process that occurred.

For my clients' conventional loan escrow that closed a couple weeks ago a fresh 4506T was required during the first 10 days of escrow prior to loan contingency approval. If you don't have a fresh 4506T in hand today you won't get it until after the shutdown ends, plus  ___ days for them to clear the ____ day backlog.

The type of loan will also determine if the mortgage originator will or can waive the 4506T requirement. Where do they sell their paper - the loan - and what flavor of mortgage backed security will it be bundled? No 4506T may represent higher risk and be less desirable. Or they may put it into a portfolio loan for now and then update with the 4506T before selling it off.

Also, keep in mind that congress has cut funding for the IRS repeatedly so they will not only have a backlog, but they'll have fewer people than they had last year.

The IRS is literally the Accounts Receivable Department for the Federal government. Suggest to your broker, or a business owner, that she/he should reduce headcount in Accounts Receivable and step back for her/his reaction. 

Jan 20, 2018 04:12 PM #95
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John DL Arendsen
CREST BACKYARD HOMES, ON THE LEVEL GENERAL & FACTORY BUILT HOME CONTRACTOR, TAG REAL ESTATE SALES & INVESTMENTS - Leucadia, CA
Crest Backyard Homes "ADU" dealer & Contractor

I love your ALTITUDE DUDE. Kirk Knight!

Jan 20, 2018 05:58 PM #96
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John DL Arendsen
CREST BACKYARD HOMES, ON THE LEVEL GENERAL & FACTORY BUILT HOME CONTRACTOR, TAG REAL ESTATE SALES & INVESTMENTS - Leucadia, CA
Crest Backyard Homes "ADU" dealer & Contractor

NOW FOLLOWING Kirk Knight  Great contribution for AR. Truly a breath of fresh air and good ole commin cents!

Jan 20, 2018 06:02 PM #97
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