The Impact of a Government Shutdown on the Mortgage Process

By
Mortgage and Lending with Guaranteed Rate, Marin County, CA NMLS: 22343

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

Guaranteed Rate
NMLS: 22343 
Cell/Text: 415-367-5959 Fax: 415-366-1590
rob.spinosa@rate.com

Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960

Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709
 

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate's Human Resources Department.

 

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 - (866) 934-7283

Comments (30)

Anne Edwards Johnson
JPAR Real Estate - Austin, TX
Austin Realtor | HookemhomesATX (512)917-5260

What a fabulous post. Thank you for such clarity.

Dec 27, 2018 08:25 PM
Dorte Engel
RE/MAX Leading Edge - Bowie, MD
ABC - Annapolis, Bowie, Crofton & rest of Maryland

Dear Rob,

Yes. I am planning for things to take longer, just in case.

Dec 27, 2018 08:50 PM
Lynn B. Friedman CRS Atlanta, GA 404-939-2727
Atlanta Homes ODAT Realty - Love our Great City - Love our Clients! Buckhead - Midtown - Westside - Atlanta, GA
Concierge Service for Our Atlanta Sellers & Buyers

Rob Spinosa 
Thanks for a clear eplanation of the ramifications of the shut-down.
All the best - Lynn

Dec 27, 2018 10:06 PM
MaryBeth Mills Muldowney
TradeWinds Realty Group LLC - Braintree, MA
Massachusetts Broker Owner

Thank you for a great summary Rob Spinosa.  I ran into a situation with the last shut down and a USDA loan process for one of my Listings and it is so important for everyone to know it is not due to the Buyer or the Mortgage Officer for any delay - and of course it was a domino type of purchase affecting other's transactions too - let everyone in the line of closings know so they can prepare.

Dec 28, 2018 03:57 AM
Rose Mary Justice
Synergy Realty Pros - Dandridge, TN
Synergy Realty Pros

Glad to have clarity on how it will impact our field.  Thanks for the post.

Dec 28, 2018 05:28 AM
Terry McCarley
Coastal Real Estate - Cape Coral FL - Cape Coral, FL
REALTOR, SRES, CDPE - Cape Coral, FL

I hope this is resolved very quickly!!!  People in my area are very upset about this since so many properties in FL are in flood zones

Dec 28, 2018 06:11 AM
Anne Corbin
Long and Foster - Lake Anna - Spotsylvania, VA
Serving Lake Anna & Central Virginia

I agree with Myrl Jeffcoat . I hadn't considered it. Most of my stuff right now is cash sale.

Dec 28, 2018 06:17 AM
John Wiley
Fort Myers, FL
Lee County, FL, ECO Broker, GRI, SRES,GREEN,PSA

Thanks for the update on impact of government shutdown on mortgages.

I think at most there may be some longer times for turnaround.

Dec 28, 2018 07:15 AM
Calvin Roskam
Wickstra Realty, Inc. - Shelby, MI

Good post.  I have a USDA loan that needed to get a clear to close today so we could close next week.  Buyer is moving from texas to michigan and we had a very tight timeline for possession.  Now that's out the window and the seller is renting to buyer which in my opinion is often not a great idea.  I also anticipate that when the shutdown is over there will be a back log and more delays...

Dec 28, 2018 07:16 AM
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

Great clarity. Thank you for this information.

Dec 28, 2018 08:13 AM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Great information for anyone in th emiddle of an escrow.  As you mention, taking stock on where everything is from the bigger picture can help in managing expectations.  Hotels may be getting some folks in the meantime!  Happy Holidays!

Dec 28, 2018 08:47 AM
Eric Kodner
Wayzata Lakes Realty: Eric Kodner Sells Twin Cities Homes - Minnetonka, MN
Wayzata Lakes Realty: Twin Cities, Madeline Island

Your second paragraph ends with "Ah, nothing like being held hostage by the IRS..."

 

The IRS isn't holding the hostages here. Someone else is responsible for that mess. 

Dec 28, 2018 09:27 AM
Rob Spinosa

Eric Kodner , totally agree, but have to keep that aspect out of this... 

Dec 28, 2018 09:34 AM
Doug Kaller
Academy Mortgage, Reno, NV - Reno, NV

The other thing that is affected is th issuance and renewal of flood insurance policies by the NFIP.  It will be interesting to see how this affects closings on homes located in flood areas.

Dec 28, 2018 09:28 AM
Rob Spinosa

Doug Kaller, good point.  I may revise and add that as well. 

Dec 28, 2018 09:35 AM
M.C. Dwyer
Melody Russell Team at eXp Realty of California, Inc. - Felton, CA
MC Dwyer-Santa Cruz Mountains Property Specialist

I was just going to mention that FEMA is affected so there won't be any new flood insurance policies available...and I see Doug Kaller #23 beat me to it!

Dec 28, 2018 09:38 AM
Hannah Williams
HomeStarr Realty - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-820-3376

Rob Spinosa  This is not the first year of the Government shutdown and I am sure it will not be the last --- Wish everyone could just agree

Dec 28, 2018 10:43 AM
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Experienced Agent in Kansas City Metro area

Very informative!  Fortunately all of my transactions have closed. The gov't shutdowns are a consistant problem b/c  those in charge refuse to compromise on a budget.  So this problem is ongoing.

Dec 28, 2018 12:08 PM
Debra Kukulski, Broker Associate
RE/MAX Suburban - Cary, IL
SRES;SFR,CDPE;GRI;ABR;e-PRO Realtor, Northern IL

Thank you for this important information and I hope this does not keep too many people from getting into their new homes on time!

Dec 28, 2018 03:02 PM
Marc St Martin
United Real Estate Infinity - Cape Coral, FL
Your friend in the business!

Good time for the Serenity Prayer.  "God, grant me the serenity to accept the things I cannot change, Courage to change the things I can, And wisdom to know the difference"

Dec 28, 2018 03:03 PM
Monique Ting
INET Realty Honolulu, HI - Honolulu, HI
Your agent under the sun

Every time the government shuts down, many people get negatively affected ... When that happens, I wish the politicians would not only get a freeze in their paycheck but also would not get paid at all... that should motivate them to find some resolution in a jiffy...

Dec 28, 2018 03:39 PM
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

This is ridiculous and beyond frustrating. I'm so happy our clients are not impacted at this point in time, but I can certainly empathize with those whose closings are held up, 

Dec 29, 2018 07:48 AM