At midnight on Friday Jan 19th, 2018, spending authority for most of the U.S. Government ceased to exist. One of the most disturbing effects of the shutdown is that families of soldiers killed in the line of duty will have to wait for payment of their military death benefit until the government reopens. Republicans and Democrats each have their version of how we got here, and what we know for sure is that there will be an impact on housing. Here are my Top 5 ways the housing market will be impacted:
1. Internal Revenue Service
The IRS is closed and has suspended processing requests for tax return transcripts (Form 4506T). These forms are required by most lenders as part of a complete mortgage application and are used to verify income/ability to repay a loan. Fannie Mae and Freddie Mac are expected to adopt relaxed provisions that technically allow lenders to still close loans without this form, but lenders might not take on the risk. Long story short, loans may be held up in underwriting and delay closings.
2. Social Security Administration
The SSA is closed and has suspended verifying Social Security numbers through the Consent Based SSN Verification Service. This is a further complication for mortgage processing and many lenders are choosing to hold loans up in underwriting until identity can be verified.
3. National Flood Insurance Program
The NFIP provides affordable insurance to property owners and encourages communities to adopt and enforce floodplain management regulations. The NFIP will not be able to issue new policies or renew old flood insurance policies. Lenders require flood insurance for properties that lie in certain high-risk areas so borrowers may be forced to wait until the shutdown ends to bind affordable policies.
4. HECM Loans
The Home Equity Conversion Mortgage (HECM) program allows homeowners over age 62 to withdraw a portion of their home’s equity every month to offset the challenges of a fixed or reduced income. This program is administered by the FHA and their contingency plan states that they will not be endorsing these loans during a shutdown.
5. Rural Housing Programs
Yes, there is plenty of rural housing in Orlando and savvy borrowers take advantage of USDA loans in parts of Lake Nona, Clermont, and other populated suburbs. The U.S. Department of Agriculture will not issue new rural housing Direct Loans or Guaranteed Loans during the shutdown.
In 2013 the government shutdown for two weeks and sales volume declined modestly but rebounded pretty soon after the government came back online. At that time the total sales volume decline was 16.9% month over month but the market had completely rebounded after several months. Any effects are expected to be short-term and the market will surely recover however delays will be common and borrowers who need to be in a home by a certain date should seek alternative financing opportunities. Contact Don Harkins, REALTOR® today for answers on how to Sell or Buy a home in this economic climate.