The Impact of a Government Shutdown on the Mortgage Process
If you are a Federal worker, then you don't need to hear it from me. Dealing with the government shut down interjects uncertainty into your life and can cause financial stress. If it's any consolation, the same holds true for the mortgage process. When those who are buying a home have their transaction caught in the middle of a political tug-of-war, timelines can get fuzzy, stress levels can get high and dominoes for sellers and buyers can fall. Where possible, we do all we can to "get in front" of a shutdown but with the unpredictable nature of our current political environment, it's not always possible to take precautions. For all of us, here are some of the ways that a government shutdown can impact the mortgage and homebuying process:
IRS Tax Transcripts
Since the IRS may cease operations during a shutdown, obtaining a 4506T (request for tax transcripts) may become impossible. And most loans require these prior to being funded. When a shutdown occurs, we sometimes have a transcript in our file already, because it had been ordered and processed before the shutdown, but while the IRS is on ice, the strategy shifts to waiting until they re-open. Ah, nothing like being held hostage by the IRS...
Social Security Administration (SSA) Verifications
Like the 4506T, many of our loans require verifications of social security numbers. Fortunately, past shutdowns have seen the SSA operate as usual.
FHA, VA and USDA Loan Processing
Recent experience has shown that the FHA and VA continue to operate during a shutdown, albeit with a skeleton crew. Turn times can be impacted and delays are to be expected. Conversely, the USDA has often closed entirely.
Verification of Employment (VOE)
Verifications of employment are required on most files and if the borrower is a government employee, obtaining this may be difficult or impossible until normal operations resume.
As I write this, we are several days into a shutdown and several days into the holiday week. It's an especially frustrating time for those who are in process and hoping to have some clarity on their close date soon. Because of this, it's important to realize that all parties of the transaction may have to make adjustments in order to keep sane and keep the primary goal in mind --- which is getting the escrow closed. When fighting the government, there is little to gain and much hair to lose, so it's best that cooler heads prevail and develop the best workarounds possible. This could mean taking a careful assessment of what happens if close is delayed a couple of days, a week, or longer. In the absensce of progress, planning is the next best exercise and we're here to help you with it.
E pluribus unum,
Robert J. Spinosa
Vice President of Mortgage Lending
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709
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