The last time the U.S. government shut down was in October 2013. What we learned back then is that mortgage loan processing hit a roadblock in the loan verification process. When nonessential workers from the Internal Revenue Service and the Social Security Administration were sent on furlough, there were no workers with the IRS who could verify that your tax returns had been filed, nor were there workers in the Social Security Administration to verify the validity of your social security number. While some lenders decided to close loans without these security measures, some thought the risk was too high and opted to delay loan closings.
The Department of Housing and Urban Development (HUD) has local and regional offices throughout the country that offer guidance on FHA loans. With an extremely limited staff on-site, lenders will see delays in getting answers to their questions. Lenders do have another option with FHA’s Resource Center and National Servicing Center’s (NSC) Call Center that will be available to answer their questions. If the questions need to be elevated to HUD staff, the questions may not be answered until the staff returns to work. With the shut down in effect, FHA will still be able to endorse single-family home loans, but not Home Equity Conversion Mortgages, or Title I loans. FHA Connection will remain accessible to assign case numbers.
The Credit Alert Interactive Voice Response System (CAIVRS) will be available ,however FHA may not be able to ensure that the information contained in the system is up-to-date. Because the purpose behind the CAIVRS verification is to ensure that no borrower with delinquent, Federal, non-tax debt is given a new FHA-insured loan in accordance with the Debt Collection Improvement Act, lenders may decide to delay loan funding.
The decision to close a loan, or not, will be decided by each individual lender, so you should contact your lender to review how their decision will impact your loan closing and interest rate lock period.
A protracted shutdown could see a decline in home sales, reversing the trend toward a strengthening market that we’ve been experiencing.
Sylvia M. Gutiérrez is author of Mortgage Matters: Demystifying the Loan Approval Maze. RealWorks Press: 2015. Available at Amazon, Barnes & Noble, iTunes, and independent booksellers everywhere. Distributed by Ingram.Licensed
Registered mortgage loan officer with NMLS id: 372427
2018 Vice President, South Florida Mortgage Bankers Association
Associate Member, National Association of Real Estate Editors
2014 thru 2017 Diversity & Inclusion Co-chair, NAMB – Association of Mortgage Professionals