A partial shutdown of the U.S. government has entered its sixth day as both Democrats, Republicans and President Donald Trump dig in their heels over partial funding for a wall or partition structure along a small portion of the U.S. southern border and it may be causing a headache for some prospective homeowners.
Homeowners hoping to use a loan guaranteed by the United States Department of Agriculture (USDA) – a program that guarantees loans to low and moderate income buyers in designated rural areas – won’t see their application approved if it was submitted after Friday, December 21, according to Marianne Martin James, a Realtor with House 2 Home Realty, relaying information she received notice from a local banker.
“A USDA loan is a great program for low down payment, interests rate and possibly subsidized housing costs,” James said in a post on Inman Coast to Coast. “It is well worth the wait… if you can hang on [until] things return to normal.”
Linda Davidson, a branch manager and senior loan officer with Fairway Independent Mortgage Corp explained that all USDA loans require a “conditional commitment,” which is issued by the USDA office and therefore all USDA loans cannot close.
“This would put a hardship on buyers, sellers, etc as everything is on hold,” Davidson said. “I don’t see lenders working around this specific area because of the risk of having a loan that USDA will not insure.”
It’s not just USDA loans that will be impacted, but other more traditional market solutions, according to Davidson.
If there was a flag on an individual’s social security number – which would require a lender to verify the number through the Social Security Administration – the office cannot perform that action currently. The office also cannot confirm social security income to help an individual qualify for a mortgage, Davidson said.
Lenders will also face delays in getting Internal Revenue Service (IRS) transcripts for self-employed borrowers to verify tax returns, Davidson said.
“Loan originators should reach out to all parties involved if there is going to be a delay in a closing,” Davidson said. “If the [loan originator] has not done so, I would suggest that realtors verify with the lender to make certain that there are no hold-ups. It is unfortunate but we have been here before and this too, shall pass.”
Diane Terry, a managing broker with Windermere Real Estate in Seattle, said she has not personally had clients impacted by the shutdown, but echoed Davidson’s comments regarding the IRS.
“Loan approvals requiring IRS check of returns and closings will be affected,” Terry said. “Hopefully lenders are getting ahead if this and informing clients.”
Home equity conversion mortgage loan endorsements by the Federal Housing Administration (FHA) are also currently on hold, as well as new loans through the FHA’s multi-family housing program, according to the National Association of Realtors. In general, some delays with FHA processing may occur due to short staffing, according to NAR.
Prospective homeowners looking to buy a home on Native American land will have issues closing on their home, according to Dan Hamilton, a Realtor with The Hamilton Real Estate Group. Homes that require processing by the Bureau of Indian Affairs will not be able to go forward, Hamilton said, passing along a note from his brokerage’s escrow company, West Coast Escrow.
In Hamilton’s home market of Palm Springs, roughly 40 percent of home closings will be impacted.
The impact is obviously regional and specific to certain types of transactions, with many getting their mortgages approved and closing without a hitch. A number of real estate agents told Inman that the shutdown will have either none, or very little impact.