Government Shutdown 2013 impacts Mortgages Interest Rates, and Real Estate

The Federal Government Shutdown that began last night is going to have a  negative impact on the real estate industry in a few key ways. In general this does not bode well for buyer or sellers. Specifically expect to see delays in the mortgage lending side of the real estate process.

Home Loan Processing

Part of processing a home loan involves the lending bank verifying specific borrower information with the Government.  Lenders need information such as income and Social Security number verifications from the IRS and Social Security Administration. With the shutdown these verification may slow way down or even cease.  The loan processing slow down will begin with new loans coming into the system so we may not see a dramatic impact for a few weeks. If the shut down is more than a few days or weeks this slow processing will slow down all real estate transactions except cash sales.

FHA Loans during the Government Shutdown

The U.S. Department of Housing and Urban Development (HUD) administers of The Federal Housing Administration (FHA) home loan program designed for low- and middle-income and first-time home buyers. HUD has said in a statement that “FHA will be able to endorse single family loans during the shutdown. A limited number of FHA staff will be available to underwrite and approve new loans.” Loan officers can use FHA’s computer-based system to initiate loans, but with a limited staff, FHA won’t be available to answer questions as the loan moves forward. If you are buying with an FHA loan, or you are selling to a buyer getting an FHA loan expect a potentially slowed down process and plan for possible delays.

VA Loans and the Government Shut Down

VA loans that are guaranteed and administered the Department of Veterans Affairs for Americans that have served in the military will not be impacted by the current shutdown.  Nor will Mortgages purchased and securitized by Fannie Mae and Freddie Mac.  The reason is that their operations are funded by lending fees, not direct government funding. If you have more questions about how this government shut down is going to impacts on the real estate market in Cincinnati feel free to call me. I’d love to answer your questions. 518.1140