Federal Shutdown, what does it mean? The federal government shutdown is already affecting key parts of the housing market – and if you’re buying, selling, or refinancing, here’s what you need to know.
Several government-backed programs are facing delays or suspensions:
- USDA rural home loans are currently paused. If there has not been a conditional commitment issued by the USDA already these loans WILL be delayed until after the shutdown is over.
- FHA and VA loans are still being processed, but reduced staffing could slow down approvals and appraisals. (I don't anticipate any noticeable delays for the typical FHA/VA loan, the issue may come if there is a condo approval or something out of the ordinary that would require answers from either as the field offices and Hud Headquarters will be closed)
- Transcripts: The IRS may be delayed in processing tax transcripts, which is a common requirement for many mortgages. (This is a largely automated process and transcripts should still be available. Filing for extensions for taxes will be a problem )
- THIS IS THE BIGGIE: National Flood Insurance Program (NFIP), managed by FEMA. However, there are private flood insurance alternatives available that could provide coverage options. If you have clients buying in flood zones, be sure to get that going ASAP to avoid delays. Conventional loans will accept private flood insurance but FHA will not. Pay close attention to properties that are in flood zones.
All of this could mean longer timelines, more uncertainty, or even delayed closings for some transactions.
For Conventional loans (Fannie and Freddie) there will be no issues. Assuming there is flood insurance available for homes that need it and that the IRS transcript system remains functional.
RATES: While we are off the lows we saw in mid-September, we are still better than the lows we saw in September of last year when rates bounced like a rubber ball. That makes a month of rates at current levels without a big bounce after the Fed announcement lowering the Fed Funds Rate. Keep in mind that Rates move ahead of any Fed moves in anticipation of the move and move on the economic data not the actual Fed move. The Fed lowering rates can be seen as inflationary and can cause longer term rates to climb. Fed Funds does not cause mortgage rates to move but the anticipation of 2 more Fed moves this year is keeping rates at current levels. So where are they? As I type, the NJ First time buyer program is at 5.75% and a 30yr conventional is in the Mid 6’s for well qualified buyers. MUCH better than we were all year! The downside to lower rates is competition. As rates come down there will be more qualified buyers fighting for existing inventory which is great for sellers but not necessarily as good for buyers. Another concern with the federal shutdown is reporting. We will not be receiving economic data as we normally do. This includes the Jobs Report, CPI, PPI etc…. all potential market movers.
In the absence of data the market will move more on technicals and current trends which could be good for rates since the trend has been towards lower rates. It is also possible we could see a slowing in the economy as anyone dependent on wages from a federal job sees no paycheck in the coming weeks.
Since 1987…. Helping your clients finance their piece of the American Dream. Do you have anyone you would like me to call?
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Robert Rauf
Mortgage Loan Originator NMLS# 248937
http://www.RobertRauf.com
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Cell (732)740-0175
RRauf@CMGhomeloans.com
www.RobertRauf.com
Since 1987 I have been helping my clients fulfill their dream of home ownership! CMG Home Loans is located at 222 Commons Way Toms River, NJ 08755. NMLS #1820. Visit www.RobertRauf.com for more information. NJ Mortgages, New Jersey Mortgages, Mortgages in NJ, mortgage in New Jersey, Mortgages in New Jersey, Toms River NJ 08753, Toms River NJ 08755, Brick NJ 08723, Brick NJ 08724 Mortgage in Ocean County NJ, Mortgage in Monmouth County NJ, Jackson NJ 08527, Howell NJ 07731, Lacey 08731 08734, Beachwood 08722 Bayville 08721,
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